National President of the Confederation of Real Estate Developers Association of India Lalit Kumar Jain has been spearheading industry level talks with the Government to rein in construction costs, ease cash crunch for the sector and boost housing sales in an increasingly tough realty market. He spoke to Business Line on the challenges that lie ahead.

Excerpts from the interview:

What are your demands from the Government in the latest talks?

There is a shortage of 31 million houses in India of which 26 million are in the economically weak and low income group category and this gap is widening. So we have told the Government that it is time we move towards reforms that will help satisfy the needs of these sections.

These reforms include administrative reforms relating to faster approvals, land reforms to protect green land and making urban infrastructure viable through higher density and removal of FSI norms as has happened in Andhra Pradesh. We have also asked for fiscal reforms relating to tax, banking and procedural issues.

How is the Government reacting to these talks?

The Finance Minister has spoken to the Banking Secretary and he arranged a meeting with the Indian Banks’ Association (IBA) and asked us to co-ordinate with the IBA. So there is willingness among the Government to do something which is very positive and I hope the tempo remains.

Our recommendations have been well received and will be discussed with the IBA Core Committee before giving them to the Ministry of Finance. RBI will have a huge role to play as well.

Is there a timeline for taking these talks to the next level?

The timeline would depend on the conviction of the Prime Minister and the Finance Minister on what they want to do as the ball is in the Government’s court. However, they have a limited time window as the festival season is ahead, and I don’t think they will be able to do anything after February, so if they have to act it has to be between September and February.

What about the Government’s suggestion of reducing prices?

We told them there has been no increase in prices for the last two years in most cities. Delhi and Mumbai should not be included as they form less than 10 per cent of the market size. We also told them how costs have increased on account of rise in premium and development charges, stamp duties, land cost and service tax, labour and input cost. How do you compensate for these added costs if there is no escalation in sale price?

With demand constrained and developers refusing to cut prices how do you see volumes reviving?

According to me now the market wants supply and at the first opportunity prices will go up. If the Government wants to manage pricing it has to ensure supply which is the only way volumes would revive.

But the Government claims that developers are sitting on an unsold inventory of 5 lakh houses that are vacant. So how is supply a constraining factor?

We challenged the data and they accepted their figures were wrong and that there is no such stock in the market. It was a disconnected figure and there is no mechanism to verify it. We are now jointly planning to work with IBA, Government and housing industry to collect the correct data on inventory.

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