In a bid to give a boost to the nation’s sagging real estate, Finance Minister Nirmala Sitharaman has recently announced some measures, including the setting up of a Rs 10,000-crore fund for non-NPA and non-NCLT affordable housing projects that are stuck due to lack of funding. However, will these measures help revive the real estate sector and benefit homebuyers? Also, despite the government’s current focus on affordable housing, what sort of challenges remain in this segment? In an exclusive interview with Sanjeev Sinha, Parveen Aggarwal, Founder and Chairman, Signature Sattva, shares his views on the recent developments in real estate and various issues plaguing the sector. Excerpts:
The finance minister has recently announced some measures to boost real estate. Do you think this festive gift will be able to revive real estate?
The recent announcement by the government as a festive gift to boost the economy, real estate and the housing sector is a positive step towards not just boosting the sentiment but also in bringing more transparency in the entire realty sector. Providing funds for pending projects which are non-NPA and non-NCLT and fall under the affordable and middle-income category is not just an addition to the prevailing norms for affordable housing, but will also be an add-on for the entire real estate sector.
The government has also taken some initiatives to ease financing for homebuyers— how important do you think this is in context of faster sale and possession of projects?
The government on its part has introduced the mega-merger plan of PSBs and upfront capital infusion of Rs 70,000 crore. We expect the decision to improve the lending capacities of banks. In fact, the country’s largest lender State Bank of India has already announced linking of home loans to the repo rate. With interest rate trending downwards, it’s not just the customers who will be benefitted, but it will also help the real estate sector to return to its pace especially during the festive season.
With the government being so stern with its objectives, the rapid sale and possession of projects hold a positive stance. Looking at FY 18-19 or H1 of FY 19-20, sales have improved at most of the projects which are being developed by developers who adhere to government norms and policies.
Now that more and more players are focusing on the affordable housing segment due to incentives offered by the government, how do you view this added competition/interest in the market you specialize in?
Affordable housing has been the buzz word in the real state arena for more than a decade now, but it received greater prominence only in 2015, when the Modi government made a grand announcement of providing ‘Housing for All by 2022’. This growth opportunity has given a platform to affordable housing. With the demand across India for the affordable houses rising over time, developers do see this segment beneficial for everyone.
What are some of the challenges that prevent developers from meeting the rising demand in the affordable housing segment?
The fact cannot be denied that the government has been taking repetitive measures to boom the affordable housing segment. However, there is still a scope of challenge for us to meet the rising demand in the segment. Firstly, land prices being too high makes the situation a bit difficult in the metro market. We expect the government to look and help us with unused land parcels. With this the high price of land can be controlled.
Secondly, though the government has taken the decision of affordable housing to be taxed at 1 per cent GST, but it still stands to be the biggest challenge.
You have recently invested in Alwar as well as Gurugram. What is more important to the affordable housing segment— suburbs of established metros or Tier 2 and Tier 3 cities?
An interesting trend that we have been witnessing over the last few years is a shift in consumer preference towards suburbs and smaller cities as locations to invest into the residential real estate. This has resulted in several tier 2 & tier 3 cities like Chandigarh, Kochi, Indore, Bhuwaneshwar, Nagpur, Alwar, Moradabad etc coming into the purview of end-users.
There are several factors that work in favour of these cities emerging as residential hotspots. These include availability of land at lower costs, new infrastructure developments, and lower cost of living as compared to the tier 1 metros. Another key factor is the increasing economic activity in these cities. With more industries coming in, the city’s workforce is growing which has had a ripple effect on the housing market in these locations. Attractive pricing and future growth potential also play a very important role for investors and end users looking at tier 2 markets.
What role the affordable housing segment will play in the resurgence of real estate after the current slowdown?
The Indian economy including the real estate sector is passing through a challenging phase now. However, the affordable housing segment remains unaffected. The realty sector is no doubt witnessing a stagnancy in new projects, but the affordable housing segment is moving relatively fast. The recent measures taken by the government have emphasized their focus on affordable housing, and with this we expect the segment itself to drive the entire real estate sector.