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The Confederation of Real Estate Developers Association of India has urged Finance Minister P. Chidambaram to explore ways to reign in construction costs and encourage housing sales.
It would be unviable for developers to bring down prices but the Government should help bring down interest rates and restore investor confidence. The confederation also urged the Indian Bankers Association to involve its members in the banks’ advisory committee on housing, as suggested by the Finance Minister, said a press release from CREDAI.
Built up space is piling up, debts and financial defaults are rising, and the real estate sector is shrinking due to adverse market conditions, high cost of inputs, tight monetary policy and large burden of taxes,” said CREDAI in a note to IBA Chairman Alok K. Mishra, according to the press release.
Housing should be treated as a priority sector along the lines of infrastructure and home loans provided at 7 per cent for the low income groups and economically weaker sections. Similarly, the margin money contribution for availing home loans should be reduced to 15 per cent from the prevailing 20-30 per cent. CREDAI suggested a rollover provision for loans to the real estate sector and modification of NPA norms to enable this by banks, housing finance institutions and financial institutions. Banks should be encouraged to fund the developers with fresh infusion of funds on a priority basis to enable them complete on-going projects, CREDAI said. Risk weight assigned to real estate projects should be reduced to the level of other industries for the purpose of credit-disbursal by banks.
Similarly, CREDAI said banks should facilitate land loans as part of the project cost, when the land is purchased from government.
Banks and HFIs get concessions on loans up to Rs 20 lakh under priority sector loans, and this should be hiked to at least Rs 35 lakh due to inflation and need for credit flow to the housing sector.
CREDAI also suggested that banks give priority to the affordable housing segment – homes with up to 1,000 sqft carpet – and allow project funding up to 40 per cent of the cost, inclusive of land price.
The key factors that add to the high cost are local municipal taxes, ready-reckoner rates for deciding stamp duty, cess and even VAT.
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