Govt steps in to re­vive re­alty sec­tor

HELP­ING HAND Re­cent pol­icy de­ci­sions of Pun­jab gov­ern­ment are a wel­come move for the state’s re­alty sec­tor. But, this should only be the ini­tial steps to boost the for­tunes of a strug­gling re­alty mar­ket

Hindustan Times (Chandigarh) - Estates - - ESTATES - Mu­niesh­wer A Sa­gar mu­niesh­wer.sa­gar@hin­dus­tan­times.com

All re­alty seg­ments in Pun­jab, res­i­den­tial and com­mer­cial, have strug­gled with slow­down. Over­all eco­nomic slow­down and an un­cer­tain and un­sta­ble state pol­icy en­vi­ron­ment didn’t help the growth prospects. With the new state gov­ern­ment at the helm, this is ex­pected to change. Though re­sults are still to ap­pear, yet the re­cent pol­icy de­ci­sions in­di­cate right in­ten­tions of the state gov­ern­ment.

WEL­COME START

The state gov­ern­ment in the first bud­get af­ter its for­ma­tion ear­lier this year slashed the stamp duty paid on the reg­is­tra­tion of prop­erty from 9% to 6%. This week, the Pun­jab gov­ern­ment re­duced the col­lec­tor rate by 5% in ur­ban ar­eas and by 10% in ru­ral ar­eas. Col­lec­tor rate is the min­i­mum prop­erty price on which the stamp duty is paid on the reg­is­tra­tion of prop­erty.

Vicky Sharma, 36, di­rec­tor, Veer Col­o­niz­ers and Builders, based in Amritsar, wel­com­ing the re­duc­tion in the stamp duty and the col­lec­tor rates, says, “The re­duc­tion in the stamp duty from 9% to 6% was the first ma­jor en­cour­ag­ing step toward reignit­ing the buyer in­ter­est in the re­alty mar­ket. Ear­lier, the bur­den was too high and this dis­cour­aged the buyer. Now, with the gov­ern­ment re­duc­ing the col­lec­tor rate also by 5% in the ur­ban ar­eas and 10% in the ru­ral ar­eas, an­other in­cen­tive for the buyer to re-en­ter the hous­ing mar­ket has been given. This is a good start for the new state gov­ern­ment, from a real es­tate per­spec­tive, and very home buyer friendly.”

On the gov­ern­ment de­ci­sion to al­low builders to mort­gage project prop­erty against the ex­ter­nal de­vel­op­ment charges (EDC), li­cense fee and other dues, Bathinda based Ra­jin­der Mit­tal, 56, chair­man, Mit­tal Group of Com­pa­nies, says, “It will not only help builders but also the im­prove the over-all re­alty sec­tor growth.”

He adds: “Builders strug­gle with low sales and fi­nan­cial crunch were in a dif­fi­cult spot and were strug­gling to pay up the EDC and other gov­ern­ment charges. They could give bank guar­an­tees against the EDC charges but this was prov­ing to be dif­fi­cult in the slug­gish mar­ket con­di­tions. Fail­ing to meet the EDC charges meant can­cel­la­tion of ap­provals. This step will help builders avoid such can­cel­la­tions. Af­ter com­plet­ing and sell­ing the project he can al­ways full pay the pend­ing EDC and other gov­ern­ment charges. Now builders can now fo­cus on com­plet­ing their projects and on ex­pan­sion plans. ”

In an­other pol­icy de­ci­sion, the gov­ern­ment has re­laxed the pay­ment ten­ure and penal­ties for the auc­tioned prop­er­ties. As per the ex­ist­ing pol­icy, the suc­cess­ful bid­der of prop­erty sold through auc­tion was man­dated to de­posit in­ter­est ev­ery six months dur­ing the mora­to­rium pe­riod, and de­lay in de­posit was al­lowed only up to 90 days from due date. The new pol­icy will pro­vide for con­do­na­tion of de­lay up to three years, sub­ject to charg­ing pe­nal in­ter­est at 18% per an­num.

“In a re­alty mar­ket strug­gling with liq­uid­ity crunch, this pol­icy ini­tia­tive will help im­prove the re­sponse of the bid­ders for gov­ern­ment auc­tions. And, gov­ern­ment auc­tions get­ting good re­sponse al­ways help im­prove the over­all mar­ket sen­ti­ment. All the re­alty stake­hold­ers will be happy from this gov­ern­ment step,” said, Anil Cho­pra, 64, chair­man, CREDAI-Pun­jab (Con­fed­er­a­tion of Real Es­tate Devel­op­ers’ As­so­ci­a­tions of In­dia)

SEC­TOR WANTS MORE

Lo­cal real es­tate ex­perts and stake­hold­ers say, though th­ese gov­ern­ment pol­icy de­ci­sions are en­cour­ag­ing for the re­alty sec­tor in the state, but on their own th­ese will not be enough for bring­ing in re­vival in the sec­tor.

“The real es­tate growth de­pends heav­ily on the in­come sur­plus gen­er­ated in other sec­tors like in­dus­try. Peo­ple in­vest in the re­alty sec­tor only when they have sur­plus in­come af­ter meet­ing their ex­panses. This is true for the builder and the buyer alike. For this to hap­pen, the state gov­ern­ment must cre­ate a busi­ness friendly en­vi­ron­ment in the state. Steps should be taken to boost growth in all sec­tors of the econ­omy – man­u­fac­tur­ing, agri­cul­ture and ser­vices sec­tors. If this hap­pens the real es­tate sec­tor is bound to ben­e­fit. Oth­er­wise th­ese re­cent pol­icy de­ci­sions will lit­tle or no dif­fer­ence to the sec­tors growth and re­vival,” says Cho­pra.

One of the ma­jor fac­tors in the slow­down in the state’s re­alty sec­tor is time taken for clear­ing of new projects and get­ting all the nec­es­sary gov­ern­ment ap­provals for a re­alty project.

“On an av­er­age it takes a year for a builder to get all the req­ui­site gov­ern­ment ap­provals and li­censes. This cre­ate not only long ges­ta­tion pe­riod for a re­alty project from plan­ning to im­ple­men­ta­tion stages, but, also adds to the over­all projects costs. This im­pacts the af­ford­abil­ity of projects. The gov­ern­ment must im­prove the clear­ance process and make the sin­gle win­dow sys­tem more ef­fec­tive,” said Mit­tal.

The fi­nan­cial bur­den on builders, and con­se­quently, on buy­ers should be di­min­ished by re­duc­ing dif­fer­ent gov­ern­ment charges like EDC and lib­er­al­is­ing the li­cens­ing pol­icy. “The gov­ern­ment must en­cour­age the smaller and the lo­cal builder in the state. At present, the pol­icy en­vi­ron­ment is not very con­ducive for him. The gov­ern­ment should fa­cil­i­tate and en­cour­age the builder to en­ter the af­ford­able hous­ing in a big way. This price seg­ment is where most of the de­mand is con­cen­trated and if this picks up then the re­alty sec­tor and all its stake­hold­ers will gain im­mensely,” says Cho­pra.

Some re­alty stake­hold­ers like buyer groups are also keen on state gov­ern­ment be­ing more ef­fec­tive in im­ple­ment­ing the Real Es­tate (Reg­u­la­tory and De­vel­op­ment) Act 2016. So far, the state is lag­ging be­hind other states like Ma­ha­rash­tra in this re­gard. Ear­lier, the anx­ious buyer with­drew from the hous­ing mar­ket be­cause of poor ac­count­abil­ity of builders and in­abil­ity of the gov­ern­ment hous­ing bod­ies to de­liver them jus­tice. Now with Rera au­thor­ity in the state, the buyer ex­pects more ef­fec­tive gov­ern­ment reg­u­la­tion of the sec­tor.

HT FILE

The gov­ern­ment also re­laxes the pay­ment ten­ure and penal­ties for the auc­tioned prop­er­ties.

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