Housing is the second-largest employer in India, and it has seen a 30 per cent growth over the last two years. But new regulations, and a liquidity crunch after the NBFC crisis, has led to an increase in capital requirements for developers and this must be addressed, says Niranjan Hiranandani, President, NAREDCO (National Real Estate Developers Council). In an interview with BusinessLine , he spoke about the year gone by, outlook for 2019, and the way forward for the sector in terms of overcoming the liquidity crunch. Excerpts:

What was 2018 like for the sector?

When compared to the previous year (2017), the beginning of 2018 was really good and things went fairly well. With GDP growth, demand situation has improved. Commercial real estate did good and residential sales picked up. But what happened was subsequent to the IL&FS story everything has turned back again.

And going into 2019, what are your expectations?

I am very bullish. The need base is high, and even the Prime Minister is pushing for the sector. So, it cannot be perennially down. Despite disruptions, the inherent demand for housing has not come down. In fact, it has gone up. If the projects registered over the last 18 months come up in another three years, there will be a 30-35 per cent compounded annual growth.

Are they any pending issues that need to be resolved?

A large number of people are waiting for correction in GST rates. If you buy three months before the building is ready, then you pay 12 per cent GST; post occupation there is no GST. We have asked the government to consider bringing down the GST rate.

So, has this affected demand?

See what you see in the last 6 to 8 months is not really unsold. There is sufficient demand for those apartments, but people are postponing the closures. This is one-off thing. We think the correction of GST rates will actually initiate that buying.

What about the liquidity crunch?

After RERA, requirement of cash flow has increased (for developers). Now, combine that with the postponement in bookings, and then you will see a project that required ₹50 cr earlier will now need ₹150 crore.

The gap (in cash flow) was filled by housing finance companies and NBFCs (non-banking finance companies). But because of the IL&FS crisis, and the subsequent disruption, funds are not coming in as fast as they used to.

How will the sector manage this?

My view is that ₹30,000-50,000 crore will be additionally fuelled into the sector, directly or indirectly, either through a structuring by the Reserve Bank of India or the National Housing Bank.

There is no negativity in terms of growth. Only the capital requirement has gone up. You either get the banks to lend more, or ask NBFCs to do it, or by some other means. But capital has to come in for the industry to grow.

What about affordable housing?

The number of houses coming in the ‘affordable segment’ has increased disproportionately when compared to what it was before. In the next three years, affordable housing will lead the race.

But it is not that the other segments (commercial, mid-income and upscale projects) will not grow. All I’m saying is that you have opened up a newer segment that did not grow so fast.