Kerala Realty scenario is bright. Moreover, the demand-supply ratio to a large extent is balanced in Kerala except for Cochin where presently the tilt is towards excess of supply that is taking a toll on the real estate industry, says SN Raghuchandran Nair, Vice President - CREDAI National and Chairman – CREDAI Kerala. He is also the Managing Director of SI Property, a leading developer in Kerala.
Edited Excerpts of his Interview with Sandeep Pattnaik of Gharabari.com...
1. Tier II and III cities are likely to be on the radars of Investors, a shift in their focus from the Metros and other prime cities to these small cities. Then how the Kerala realty market will be benefited out of that? What is the overall realty trend in the southern belts of the Country in general and Kerala in particular?
A. Kerala is a developed State in all parameters when compared to other States in India. Every City, Municipality and Panchayat in Kerala is self-contained in terms of infrastructure and resources. Cochin is the commercial Capital of Kerala and Trivandrum the State Capital. Kerala has only Tier II and III Cities.
Kerala's market is dependent on the NRI, Non Resident and local Keralites. There are very few real estate investors other than Keralites who invest in Kerala when compared to Bangalore, Madras, Hyderabad, Mumbai, etc. On the contrary, a lot of Keralites invest substantially into these Cities. It is very unlikely for the real estate investors to find a fancy to zero in any City in Kerala when they shift from Metros and Tier I Cities.
Hence, the chances of shift in real estate investors to Tier II and III cities will have very little impact in Kerala. This is more so from the fact that, despite the presence of Pan India known Developers in Cochin which has a metropolitan culture to a certain extent though not a Metro yet, did not attract non-Keralite real estate investors to a noticeable level. One of the main reasons could be that it is not a place for a short-term gain. Moreover, Kerala is not a heavy industry-friendly destination other than IT and Tourism, for the investors to flock to, to do speculative business.
The demand-supply ratio to a large extent is balanced in Kerala except for Cochin where presently the tilt is towards excess of supply that is taking a toll on the real estate industry. However, as Kerala is concerned, the real estate scenario is bright.
The overall impact of real estate in the Southern belts is very positive with Bangalore and Chennai leading the band.
2. There was a recent agitation against revision in Commercial Building tax norms in the state. Please share some light into.
A. Commercial Taxes in Kerala in the earlier days was based on the rental value. This has been revised based on the area of the unit. Hence, ambiguities relating to interpretation of taxes have been removed. However, those who had the benefit of the earlier method on account of influenced reduction of actual rental value are agitating as the present method will enhance their taxes.
3. Recently, a consultation meeting on criteria and ranking of cities was held to decide which cities to be included in the Union Govt's 'Smart City' plan. The States have suggested parameters like quality of vision document and a city development strategy, past track record in implementing reforms, progress under Swacha Bharat Mission and Information and Grievance redressal mechanism among others for inclusion into smart city. How do you think any city in Kerala fit into the criteria?
A. The Union Govt's Smart City criteria and parameters are well within the Vision Document of our State. In fact, a lot of Cities in Kerala qualify for this status.
Credai Kerala strongly believes that this proposal will definitely boost the real estate in the sub urban areas adjoining the Cities. We will have more planned Cities with adequate infrastructure. Credai Kerala has been contributing inputs to the various initiatives of the State Govt to take forward the development of the State. We have been insisting to the State Govt to implement a new Master Plan with a vision for the next 15 years replacing the present obsolete Master Plan which was done in 1971. We are already putting up our case for a location in Trivandrum to be included in the proposed Smart City Plan.
4. Any issue you want to share faced by the realtors in Kerala and the suggestions from the apex body?
A. Realtors in Kerala face different issues when compared to other parts of the country. Being a State with 590 km of coast line, 1950 km of backwater and 44 rivers with an average length of 64kms besides the Western Ghats, etc., Kerala has a lot of restrictions on account of CRZ and ban on quarrying and mining due to ecological issues. This leads to depletion of land availability in a State which is just 38,893 sq km or 1.19 % of India and shortage of raw materials for construction.
The Central Govt need to address this, considering the peculiarity of this State and relax the relevant provisions, failing which the real estate and construction industry, which is the largest industry, employer and contributor to the exchequer of the State is very likely to get affected badly in the coming years.
5. What are the initiatives from the State Govt towards 'Affordable Housing' in the state?
A. Though Govt wants to promote Affordable Housing, it has not really taken off. One major reason being the prohibitive cost of land. Kerala being a consumer State, the Construction Cost is higher than the other States. Moreover, the sizes stipulated for affordable housing is not acceptable to the targeted consumer. LIG and EWS is presently being catered to by the Centre and State Govts through Housing Boards, NGO and Quasi Govt agencies.
In fact a different category for Affordable Housing should be promoted through the private sector in a large way, which will address the housing shortage in India and achieve Modi's target of housing for all by 2022. To achieve this, the carpet area of Unit sizes needs to be increased to 75 sq mt and 100 sq mt in Metros and Non Metros respectively.
Tax incentives for affordable housing is a must. This could be given under Section 80 1 A (10) of the IT Act. Affordable housing may be given Infrastructure status. This measure would considerably speed up the work that housing for all by 2022 is achieved.
This category should enjoy a lower interest rate on home loans, lower Stamp Duty, no Service Tax, Vat and Labour Cess.
The Promoters of Affordable Housing be given the authority for Self-Certification of Sanction Plans and other necessary permissions. This Self-Certification would be subject to audit by an appropriate Government agency/department. Any violation of norms by the self-certifying Promoter would attract a 2X penalty.
The suggestions above are being made with 2 objectives in mind – one to make Affordable housing more affordable and two “maximising the growth” of Affordable Housing such that the overall national objective is met besides incentivizing the developers to go for more affordable housing projects.
EWS and LIG sectors are, however, not practical for the private sector.