Confronted by sluggish sales, tight finances and high interest outgo, the real estate industry seems to have its hopes pinned on the upcoming Budget for some relief. Mr Navin Raheja, President of National Real Estate Development Council (NAREDCO) and CMD of Raheja Developers, believes there is a clear case for granting infrastructure status to the housing sector. He argues that housing companies are, as such, involved in creation of infrastructure and social facilities, as part of township or group housing development. Mr Raheja spoke to Business Line on a host of issues, including the industry's expectations from the Union Budget, RBI's monetary policy stance, and the status of his company's new projects. Excerpts:

Could you outline NAREDCO's wish-list for the forthcoming Budget? What are the key demands?

We believe that the housing sector should be given infrastructure status under Section 80-IA of Income Tax Act. The reasons are clear. Today, real estate companies are involved in undertaking large-scale projects that, in addition to construction of housing units, also involve creating infrastructure and social facilities such as roads, water supply systems, sanitation and solid waste management systems. Hence, we urge the Government to consider our request for infrastructure status to the housing sector.

The real estate sector creates large-scale employment, and there are almost 200 industries which have forward and backward linkages with our sector. Incentives to the real estate sector will give a fillip to the overall economy.

Secondly, the Income Tax deduction under 80IB (10), available to undertakings developing housing projects, is applicable for those projects that are approved on or before March 2008. As this date hasn't been extended, the provisions of this section will cease to exist after March 2013.

Since the housing industry hasn't yet overcome the impact of the 2008 recession, being in a severe downturn, and there is a huge pending demand for housing, especially for the poor, it is suggested that provisions of section 80IB (10) be made applicable for projects sanctioned after March 2008, at least till 2015.

Earlier this week, RBI refrained from lowering the key policy rates, although it did reduce the cash reserve ratio. Did the RBI's decision to maintain interest rates come as a disappointment?

Yes, we were disappointed. We want the interest rates to come down. As it is, inflation has started to ease. They (RBI) will have to bring down the interest rates systematically, but they must do it fast. Today, the cost of money is too high for the real estate sector, whereas profitability is under pressure.

Most of the developers in the country are overburdened with debt. The average rate of borrowing is approximately 15 per cent. But there are builders who are paying even 23-27 per cent interest outgo on structured debts. That is a cause for concern.

Making housing cheaper or more affordable, requires provision of cheaper finance to developers as well as home buyers. That can be achieved by bringing down key policy rates and infusing more liquidity into the banking system.

Given that the housing sales continue to be weak, is there a case for further reduction in residential prices?

No. Already builders are running on very low or negligible margins. The cost of input materials has gone up substantially. So has the cost of land and construction.

Can you give us an update of your ongoing project, including Revanta, as well as the new launches that are lined up?

As far as the Delhi slum redevelopment project is concerned (Kathputli Colony), we have started construction of the transit camp, where people will reside till the construction of the main site is complete. However, the land given to us for the transit camp is less than what is needed — we have land which can accommodate only 800 transit units, whereas the requirement is far more. Efforts are on to work out these issues. In the case of the Revanta project (in Gurgaon), we have sold close to 400 units in two months since the launch. We started at Rs 4,575 per square foot, and there have already been two rounds of price increase. Revanta, with 56 stories, will be one of the tallest luxury buildings in India. It is a premium, upmarket project, and will be completed in five years.

Also, we will soon launch Raheja OMA, which again will be a premium project and will redefine housing at Dharuhera & Bhiwadi area. It is located at the intersection of NH8 and NH71B at Dharuhera. In addition, we will also be coming out with plotted development, at Sohna city.

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