The market will bounce back
Rajnikant Ajmera continues to be positive for the Indian real estate sector. Niranjan Mudholkar caught up with him to find out what drives this optimism
The current Indian real estate scenario isn’t exactly glorious. Coping with a slowdown in the demand is taking its toll. “I know the industry is in a confused state today but you have to look at the scenario from the entire Indian economy’s perspective,” says Rajnikant Ajmera, president, CREDAI.
Ajmera expects the market to bounce back soon. And the reasoning isn’t really off the mark. “Yes, the demand has slowed down but the gap between demand and supply continues to be huge. That’s why I am optimistic. It is just a question of time,” Ajmera says.
However, despite all the optimism, he says that certain challenges the industry is facing needs to be addressed comprehensively. Excessive red tape leading to severe delays in project approvals has been hampering the progress of many real estate projects. Currently, the average time for approval of real estate projects is six to nine months due to various processes. “It is essential that the government encourages fast track approvals,” Ajmera says.
A major cause for the slowdown in the real estate sector are the high interest rates for home buyers. “The government needs to bring down the interest rates on home loans to realistic levels,” says Ajmera. As an apex body representing the industry, Credai has been regularly taking up these issues with the government.
Ajmera believes that if the government provides a boost to the real estate sector then other industries will benefit. “It is a well-known economic principle that during a slump, the government should invest in real estate to boost the economy. The logic is simple; the real estate industry is closely connected with more than 260 industries. If the government provides a boost to the real estate sector then it will percolate to the other industries,” Ajmera adds.
While the government and industry bodies are taking steps to keep pace with the growing economy, it is imperative that the industry players chip in with performance, quality and transparency. Quality of construction used to be a big question mark in many segments. But that’s history.
“I think that the quality of construction has improved a lot over the last five years. With availability of good quality material and access to better technology, quality is not as big an issue,” Ajmera says.
As far as the performance of the member builders is concerned, Credai already has a code of conduct in place. This code is self-imposed and it is mandatory for all the member developers and builders.
It is quite ironic that despite a huge gap between demand and supply, there’s a slowdown in the market. Costlier home loans have added to the slump in the residential sector. Certainly, a fair pricing mechanism coupled with a good quality of supply can do wonders for the industry.
“I reiterate that the industry will bounce back to fill the enormous gap between demand and supply. Prices are bound to go up when demand exceeds supply which is the scenario currently. So we cannot really generalise the pricing factor. There has also been an increase in prices due to the growing economy,” Ajmera says.
But isn’t the increase in price rather disproportionate? “True, but the disproportionate increase in rates in many areas is because of the huge demand in the market coupled by the incredible land prices. When the land prices come down, the market rates will also come down,” Ajmera explains.
Ajmera sincerely feels the government can help the sector by opening it up and not by putting restrictions on funding. “Real estate is a key driver of the economy and the government should not put any more restrictions on the industry. I can understand restrictions on land purchase but putting restrictions with regards to construction finance is not at all healthy,” he says.
Notwithstanding the instability and uncertainty, Ajmera is positive about the industry’s future. “Our economy is doing quite well and we were touching the 9% growth rate until recent times. I think if we are able to sustain a growth rate of 6%+ then it will be a golden period for our industry.”
In fact, he has been discussing the issue with some of the best economists. “They are of the opinion that we are at the bottom curve of the hockey stick and now we have to aim at rising to the tip,” he says. Of course, the tip of the hockey stick is a possible dream given the opportunities. Ajmera does have a success mantra for that. “The industry can grow and achieve the dream, provided our product remains in the range of affordability for the end-user,” he says.