New Delhi, November, 2008: NAREDCO, the apex Government, Public,
Private Sector body welcomes the Finance Minister’s initiative to give
a boost to Housing and Construction Industry to avert recession in
economy. The body with state chapters and operation in districts and
cities, assures the government of total support in providing
affordable housing to the country by reviewing prices for such housing
projects while asking the government to roll back the tax, monetary
and credit regulation policies for lower rate of home loans, bank
credit to developers and a package to give a fillip to the industry.
The National Real Estate Development Council (NAREDCO) is engaged in
promoting nascent real estate industry and safe guarding interest of
all stake holders including buyers. It works under the patronage of
Ministry of Housing and Urban Poverty Alleviation, Govt. of India and
its members include NHB, HUDCO, PNB HFL, LIC HFL, HDFC in addition to
leading developers, HFIs and other stake holders from private sector
across the country. Few leading developers who are members of NAREDCO
are DLF, Unitech, Ansals, Parsvnath, Omaxe, Assotech, Som Datt
Builders, Sobha Developers, Eldeco, Raheja Developers, ATS
Infrastructure, TDI, Mahindra lifespaces Developers, Vigneshwara
Developers, Jaypee, BPTP, Sahara, Shipra, Suncity Projects, Amrapali,
Ambience Infrastructure, Purvanchal, Era Landmark, Ashiana etc.
The real estate sector had recorded a growth rate of 25 – 30 percent
year on year basis and has been meeting one of the essential
requirement of housing which is terribly in short supply. Contribution
of Construction Sector to GDP has been around 8.53 percent and it has
been one of the main employer for unskilled and semi skilled labour
who are approximately 32 millions. The sector supports more than 250
ancillary units like cement, steel, paint, tiles, furnitures etc.
Presently, the strict monetary policies of RBI for real estate
projects and high rate of home loan finance by Indian banks, closure
of ECBs and rise in interest rates together with stock market crash
due to selling pressure of FIIs, have lead to a situation where credit
is dried down and buyers are hesitant to purchase.
NAREDCO, had a emergency meeting yesterday and decided to request all
its members to “review their prices” of the properties by reducing
their cost, cut down on their margin, cutting down advertisement and
brokerage cost by becoming more professionally organized and by
outsourcing some of the activities and to pass all the benefits to our
customers. NAREDCO hope that this step will boost demand to some
extent on one side and will benefit our customers who will get a life
time opportunity to purchase property of their choice.
NAREDCO feel that though the Govt. of India is taking measures to
increase liquidity in the system and bring down home loan rates but it
is just not sufficient to rejuvenate demand. Interest rate on home
loan should be drastically cut by at least 3 -4 percent so that cost
of borrowings can be reduced for a common man.
NAREDCO also feel Govt. of India should take few pro active measures
to boost the demand in the sector for more employment creation and to
increase the growth rate of our country. Some of our suggestions are
as follows:
(a) Rescheduling of bank debt to the real estate developers, with a
moratorium of one to two years.
(b) Banks have become more risk averse presently, hence Govt. should
advise RBI and banks to aggressively finance real estate projects,
without calling it NPA.
(c) Where land is purchased from Govt./Semi Govt. undertakings, then
the banks should consider financing the land cost also in addition to
the construction cost of the project.
(d) FDI norms related to area and lock-in period should be further
eased to encourage foreign investment.
(e) ECB should be allowed for real estate projects.
(f) Housing should be given status of infrastructure.
(g) At present there is a mandatory requirement on banking
institutions to provide loans for the priority sector of the economy
within a prescribed percentage. With a view to encourage banks to
provide finance to the Housing Sector, it is suggested that quantum
of loans given to the first home buyer upto Rs. 30 lakhs may be
allowed to be included within mandatory quota of the priority sector
funding by the bank. This single step will encourage banks to provide
more funding to the Housing Sector.
NAREDCO appreciates the steps taken by Govt. of India to boost
liquidity in the system and therefore request to take above pro active
steps to meet down the challenges posed by economic melt down.
Credit demand of the housing sector should be met at reasonable
interest rate by further improving liquidity by RBI. Availability of
liberal, easy and short term credit and meeting working capital
requirements is the need of the hour, for completing ongoing projects,
as also to retain the confidence of the market and to sustain growth.
Real estate sector has the capacity to boost economic growth and
create maximum job opportunities. It is, therefore, requested that
real estate industry be provided all support and encouragement from
the Govt. Urgent action is, therefore, requested from RBI’s side to
advise the banking institutions accordingly.
