MUMBAI: After finance minister P Chidambaram asked realtors to sell off unsold flats at discounted prices, CREDAI, the apex body of real estate developers in the country, put the ball in the minister's court and said he should take immediate steps to boost housing stock supply through special incentives to the affordable segment.
Chidambaram had reportedly asked commercial banks to put pressure on developers to clear their inventory and lower the prices to get the economy running.
CREDAI national president Lalit Kumar Jain said the government has finally realized that "real estate kick-starts economic development". He described the reported figure of unsold housing stock of 500,000 in the country as "unrealistic". "CREDAI appeals to Chidamabaram to look at ways to bring down the cost of construction while taking steps to encourage buyers to have houses of their own," said Jain.
"We ourselves have asked member developers to start selling even at rock bottom prices as long as three month ago as nobody would like to block his capital by sitting on unsold stock and that too in a very high interest regime. On one hand, banks are discouraged to lend to real estate developers while on the other cost of fund from non-banking sources is prohibitively high," said Jain.
CREDAI has also volunteered to work with the Indian Banks' Association on the proposed committee on housing sector, which was mooted by the FM. The organization said for the past two years, liquidity in general and access to bank credits in particular has been restricted due to variety of risks. "Just as any other sector of economy, the real estate sector has also found it difficult to tap bank resources, bank credits," it said. It estimated that funding by commercial banks in the organized real estate industry is negligible.
Banks and finance companies are still wary of financing the real estate sector as RBI always keeps it in the negative list. "It is ironic that while home loans area top priority, the home developers are not," Jain regretted.
Referring to concerns over prevailing high prices of houses, he said it is akin to the typical egg-and-chicken scenario.
"The general sentiments in the market and economy are preventing buyers to move and developers are unable to bring down the prices because of very high cost of construction. Hence the demand-supply mismatch continues with the housing shortage crossing the 26 million mark," he said.The other key factors that add to the high cost of realty are the ever-increasing local municipal taxes, ready-reckoner rates for deciding stamp duty, cess and VAT. For instance, the burden on developers in Mumbai has risen on account of fungible area. The cost of labour has gone up by as high as 60% over the past two years, it said.