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