The Hindu Business Line : A case for special residential zones

Real-estate developers are urging both the Central and State governments to encourage creation of special residential zones (SRZs) on the lines of special economic zones, as such a move is seen spurring construction activity.

Developers Business Line talked to said there was need for a concerted effort towards such zones so that the demand-supply gap in the housing segment could be met. The focus of such zones could be affordable housing, which is now perceived as another potential growth driver.

The Executive Director of Pebl, Mr Anand Reddy, said that by creating SRZs, bringing about changes in the current tax structure and by also defining this under infrastructure, the overall costs could be brought down substantially.

“Together with moves by the Reserve Bank of India to bring down interest rates further and State Government stamp and registration charges, we will be able to lower the cost of acquisition of properties in SRZ projects,” Mr Reddy explained.

The Founder Vice-President of Confederation of Real Estate Developers Association of India (Credai), Mr C. Shekhar Reddy, said apart from demand to create these zones, Credai has been articulating the need to bring such projects under the infrastructure category. This will extend tax concessions and also encourage more developers to address this segment.

The Chairman and Managing Director of Janapriya Engineers Syndicate, Mr K. Ravinder Reddy, said SRZs would spur construction activity and encourage more developers to focus on this segment. Most of the developers were looking at high-cost apartments and housing.

While consensus on what constitutes ‘affordable housing’ may elude the stakeholders, most agree that this is one area that needs to be addressed as many projects catering to high-end buyers are finding the going tough.

SEZ-like status

Mr Ravinder Reddy said after a boom phase witnessed in the last four years, one of the challenges for real-estate developers is to find land at reasonable prices. Unless this issue is addressed first, there is no way one can tackle the demand and supply mismatch in this segment.

In addition, such zones, even if they are located, say, about 15-20 km from the central business district, need to be well connected. The general focus should be on integrated development as a satellite township covering housing of all types, facilities for education, shopping and healthcare. Integrated development will encourage buyers, he felt. Mr Shekhar Reddy said SRZs could enjoy SEZ-like status, with income tax and service tax exemptions. If the Government defines them under infrastructure sector, developers will get the benefit of income-tax exemption.

However, Mr Ravinder Reddy felt that for developers to now focus on affordable segment is not easy as most of the land bank created is by paying very high prices. Therefore, Government needs to play a proactive role in identifying some areas and earmarking them as special zones.

Land costs about 40 per cent of real-estate projects. If this is brought down, there is scope to develop and offer a 1,000-1,200 sq.ft apartment for Rs 15-20 lakh, Mr Ravinder Reddy said.