CREDAI today organized the “CREDAI CONCLAVE”, with a theme, “Housing the Game Changer – Leading to Double-Digit GDP Growth”, at New Delhi, against the backdrop of its continuous efforts over a period of time to persuade and influence the government to take up several reform measures and policy changes.
Delivering the key note address at the conclave Sri C. Shekar Reddy, President CREDAI National said “The main concerns of the real estate developers in the country are - The rising price of Land, labour and inputs, High burden of taxation, High cost of funding due to lopsided funding by banks, stunted cash flows, delays in NOC and other clearances and approvals besides the outdated FSI Norms . He emphasised on a need to restructure the approach to help the sector contribute more significantly to the Indian Economy.”
According to Mr Reddy the key to this change should be by adoption of ‘Single-window and Online Approval System’ to facilitate this growth. The approving authorities will have to do away with their processes which are sluggish and cause inordinate delays in project plans approval etc which translate into a cost escalation of 35 – 40 percent in the construction costs. The customers can also benefit with a saving of 15-25% merely by cutting down the delays in the approval processes, and make the cost of purchasing a house much more affordable. He emphasized on the need to ensure that the delays do not take place at the approval stage and advised the governments to institute the ‘Single Window – Online Approval Mechanism’ as a mandatory reform in the proposal for Rajiv Awas Yojna instead of an optional reform and get it implemented at the earliest.”
He urged the government to do away with the Floor Space Index (FSI) concept, take the approval process online and reduce tax burden on the industry. He reiterated that the real estate industry has a tax burden of 30-40%. This has to come down to less than 15%. The industry is paralysed by multiple taxation resulting in cost escalation and misery for the sector.
Appreciating the policy of the government of Andhra Pradesh he said “Through an order AP government has removed the concept of FSI thereby allowing the developers with unlimited FSI for the projects abetting wider roads and having bigger plots. By this simple initiative, even with higher land costs, the flats are working out to be less expensive making the houses affordable. He urged other states to do away with the FSI concept and help the home buyers.”
Speaking about the trends in the real estate sector Mr Reddy said, “According to McKinsey Global Institute report, over the next 17 years, the development of the country is expected to create 70 percent new jobs opportunities in the cities and these new jobs are going to be twice as productive as equivalent jobs in rural sector. In other words, we will witness urban transformation- the scale and speed of which has not happened anywhere in the world except in China. With this rapid urbanization, the urban population is poised to grow to 590 million by 2030. This expected transformation will, if handed well, provide the means to turn around the economy from slowdown to rapid growth. Given the existing housing shortage estimated at 18.78 million dwelling units and the need for about 60mn dwelling units by 2030 as per the report by MoHUPA. The Housing & Real Estate sector is poised to grow rapidly in the next 15 years and require an investment of $ 1.2 trillion in this period. This will require a structured and massive housing program.”
Commenting on the issue of funding for the real estate sector Mr. Reddy said “The realty sector suffers from another drawback. This sector faces several restrictive norms in accessing the bank finance. In India the funding to the realty sector is just 3 percent to developers, and 9 percent to home buyers. Due to inadequate funds access by the developers the growth of the sector is stunted. If the funding is made available from the banks both the growth of the sector could be raised and costs of the house flats could be brought down. “
He expressed his concern while comparing the lending percentages with other countries and said “The Indian scenario is disturbing as the lending percentage in US is 32 percent and in China it is 22 percent. Compared to these numbers, the Indian lending is just 12 percent when the lending to developers and to the home buyers is combined. He averred that this must increase and the banks and governments have to search their hearts whether the policies they are adopting are consistent with the growth ambitions.”
On the issue of Taxation, Mr Reddy addressed that the National Habitat Policy suggests that the total registration charges has to be a maximum of 3% and urged the government to consider it as a mandatory reform of RAY and advice the states to implement to bring down the tax on housing. On the issue of Service Tax he said that the tax has become very complicated and burdening the prospective purchaser. To the extent of sales deed consideration of Sale deed , service tax should not be charged as registration charges are paid. Only on Works Contract service tax should be charged to avoid double taxation.
Speaking on RERA Bill, Mr Reddy said, “ RERA bill is another Act going to be targeted against the developer. Other stake holders such as urban local boards, electricity authorities, fire departments are not part of the proposed RERA, thereby they are not answerable for their delays but the developer has to bear the brunt. If the with proposed stringent provisions, if not modified, will increase the cost of the housing by about 30%.
In conclusion Mr.Reddy said that with these measures industry will create huge supply of homes and create a competitive market there-by bring down home prices.
Delivering the key note address at the conclave Sri C. Shekar Reddy, President CREDAI National said “The main concerns of the real estate developers in the country are - The rising price of Land, labour and inputs, High burden of taxation, High cost of funding due to lopsided funding by banks, stunted cash flows, delays in NOC and other clearances and approvals besides the outdated FSI Norms . He emphasised on a need to restructure the approach to help the sector contribute more significantly to the Indian Economy.”
According to Mr Reddy the key to this change should be by adoption of ‘Single-window and Online Approval System’ to facilitate this growth. The approving authorities will have to do away with their processes which are sluggish and cause inordinate delays in project plans approval etc which translate into a cost escalation of 35 – 40 percent in the construction costs. The customers can also benefit with a saving of 15-25% merely by cutting down the delays in the approval processes, and make the cost of purchasing a house much more affordable. He emphasized on the need to ensure that the delays do not take place at the approval stage and advised the governments to institute the ‘Single Window – Online Approval Mechanism’ as a mandatory reform in the proposal for Rajiv Awas Yojna instead of an optional reform and get it implemented at the earliest.”
He urged the government to do away with the Floor Space Index (FSI) concept, take the approval process online and reduce tax burden on the industry. He reiterated that the real estate industry has a tax burden of 30-40%. This has to come down to less than 15%. The industry is paralysed by multiple taxation resulting in cost escalation and misery for the sector.
Appreciating the policy of the government of Andhra Pradesh he said “Through an order AP government has removed the concept of FSI thereby allowing the developers with unlimited FSI for the projects abetting wider roads and having bigger plots. By this simple initiative, even with higher land costs, the flats are working out to be less expensive making the houses affordable. He urged other states to do away with the FSI concept and help the home buyers.”
Speaking about the trends in the real estate sector Mr Reddy said, “According to McKinsey Global Institute report, over the next 17 years, the development of the country is expected to create 70 percent new jobs opportunities in the cities and these new jobs are going to be twice as productive as equivalent jobs in rural sector. In other words, we will witness urban transformation- the scale and speed of which has not happened anywhere in the world except in China. With this rapid urbanization, the urban population is poised to grow to 590 million by 2030. This expected transformation will, if handed well, provide the means to turn around the economy from slowdown to rapid growth. Given the existing housing shortage estimated at 18.78 million dwelling units and the need for about 60mn dwelling units by 2030 as per the report by MoHUPA. The Housing & Real Estate sector is poised to grow rapidly in the next 15 years and require an investment of $ 1.2 trillion in this period. This will require a structured and massive housing program.”
Commenting on the issue of funding for the real estate sector Mr. Reddy said “The realty sector suffers from another drawback. This sector faces several restrictive norms in accessing the bank finance. In India the funding to the realty sector is just 3 percent to developers, and 9 percent to home buyers. Due to inadequate funds access by the developers the growth of the sector is stunted. If the funding is made available from the banks both the growth of the sector could be raised and costs of the house flats could be brought down. “
He expressed his concern while comparing the lending percentages with other countries and said “The Indian scenario is disturbing as the lending percentage in US is 32 percent and in China it is 22 percent. Compared to these numbers, the Indian lending is just 12 percent when the lending to developers and to the home buyers is combined. He averred that this must increase and the banks and governments have to search their hearts whether the policies they are adopting are consistent with the growth ambitions.”
On the issue of Taxation, Mr Reddy addressed that the National Habitat Policy suggests that the total registration charges has to be a maximum of 3% and urged the government to consider it as a mandatory reform of RAY and advice the states to implement to bring down the tax on housing. On the issue of Service Tax he said that the tax has become very complicated and burdening the prospective purchaser. To the extent of sales deed consideration of Sale deed , service tax should not be charged as registration charges are paid. Only on Works Contract service tax should be charged to avoid double taxation.
Speaking on RERA Bill, Mr Reddy said, “ RERA bill is another Act going to be targeted against the developer. Other stake holders such as urban local boards, electricity authorities, fire departments are not part of the proposed RERA, thereby they are not answerable for their delays but the developer has to bear the brunt. If the with proposed stringent provisions, if not modified, will increase the cost of the housing by about 30%.
In conclusion Mr.Reddy said that with these measures industry will create huge supply of homes and create a competitive market there-by bring down home prices.
