MUMBAI, 1st February 2015: After a period of policy paralysis and a perceived slow-down in buying, the real estate industry is moving back to ‘positive sentiments’, especially after the change in government at both, the Centre as also in the state of Maharashtra. The reason is simple: post the change in government, we have seen positive announcements, and these have played a major role in sentiment moving from ‘negative’ to ‘positive’.
Finance is the life-line of real estate for both, the real estate developer as also the home buyer. After a period when the inflation rate steadily came down, we finally saw the Reserve Bank of India (RBI) giving real estate a reason to cheer on the festive occasion of Makar Sankranti: reduction in the repo rate by 25 bps. This was a welcome step, but by itself, it is not sufficient to create any real benefit for a home buyer. Taking this as the starting point, I would expect that the Union Budget will include measures that would result in a significant lowering of home loan interest rates.
I also factor in statements by the Hon’ble Minister for Housing on the importance of reducing home loan interest rates, and look forward to the budget having positive indications in this regard. Across the nation, real estate developers, home buyers, home finance institutions and banks would be keenly awaiting such an announcement, which is expected to result in significantly increasing ‘positive sentiment’.
From the perspective of real estate developers, I hope that the budget will do the needful to bring down the cost of borrowing for developers, because raising capital for development of new projects remains a huge challenge. Lending rates for real estate development from institutional finance sources are high, raising funds through other sources even more expensive. I hope that the interest rates on lending to real estate developers will come down post the budget; this will help rationalize the cost of construction. It will also have a positive impact for home buyers, as it would also help in reducing property prices.
Niranjan Hiranandani is MD, Hiranandani Constructions Pvt Ltd.
'Over the next decade, at least 50 per cent of real estate construction will comprise affordable housing’: Niranjan Hiranandani
MUMBAI, February 2, 2015: With the Indian real estate market passing through a ‘challenging’ scenario since the past few months, the home seeker has high, expectations. “Recently, the Union Urban Development and Housing Minister M Venkaiah Naidu said the government is considering tax breaks for affordable segment of housing, to give a fillip to the real estate sector. This is something that home seekers and the real estate industry will respond to positively,” said Niranjan Hiranandani, Managing Director, Hiranandani Constructions.
“In my view, the driver for real estate going into 2015 and the future will be low cost housing,” said Niranjan Hiranandani. “If we look at the last decade years, private developers in India were doing about 5 per cent of their total projects in the segment of affordable housing. In my estimate, over the next 10 years, at least 50 per cent of the total real estate construction will be that of affordable housing. There is going to be a significant change,” added the Hiranandani Constructions MD.
He is gung-ho over the fact that the focus of the Narendra Modi Government seems to be on ‘affordable housing’, and going by the Union Urban Development and Housing minister M Venkaiah Naidu’s recent statement about initiatives that promise a turnaround in the real estate sector, a renewed focus on affordable housing seems to be apt,” said Niranjan Hiranandani. The Union Urban Development and Housing Minister also mentioned that a revival in the housing sector will also boost GDP growth, pointed out Niranjan Hiranandani.
Across India, we should witness a huge increase in the volume of affordable housing projects over the next five years, said the Hiranandani Constructions MD. “My estimate is that it is possible that over the next 5 – 6 years, India may witness a 100 per cent increase in affordable housing business because first, there is a backlog and secondly, there exists a desire on part of people to get a house,” pointed out Niranjan Hiranandani.
“Land availability for affordable housing real estate construction is an issue. Infrastructure is another area of concern. Once India is able to sort out both issues, there will be a surge in supply and we will witness creation of affordable housing in a significant manner,” added the Hiranandani Constructions MD.
“I look upon the Union Urban Development and Housing Minister’s recent statement about the government considering tax breaks for affordable segment of housing, as something that will give a fillip to the real estate sector. This is something that home seekers and the real estate industry will respond to positively,” said the Hiranandani Constructions MD. “Apart from the tax breaks, the Minister also mentioned the possibility of a subvention scheme on home loans for middle and lower income group housing,” he added.
Commenting on the issues of ‘tax breaks for affordable housing’ and the ‘possibility of a subvention scheme on home loans for middle and lower income group housing’, he said it was ‘laudable’. “These will definitely be steps in the right direction, and will augur well for India’s real estate,” Niranjan Hiranandani said. “While these measures will definitely help revive the real estate sector, we also look forward to moves on part of the Government towards streamlining the approval processes as also creating a one window clearance system, these would also be positive steps,” Niranjan Hiranandani, MD, Hiranandani Constructions concluded.
KEY WORDS: real estate industry, affordable housing, Union Urban Development and Housing minister, M Venkaiah Naidu, Prime Minister Narendra Modi, Niranjan Hiranandani, MD, Hiranandani Constructions, tax breaks, subvention scheme, home loans, middle and lower income group housing, boost GDP growth, approval process, one window clearance.