While the residential housing segment continues to suffer from low demand and high unsold inventory, SANJAY GUPTA, managing director, PNB Housing Finance told SANDEEP SINGH that the demand is picking up in Tier II and Tier III cities and also in the mass segment in large cities. He, however, pointed that the smaller cities need employment generation badly, else the demand won’t sustain. Excerpts:
Do you see signs of recovery in the housing market?
The sentiment continues to remain bad and the approvals still are taking a lot of time but we see quite a lot of growth in the mass segment (not the bottom of pyramid). While NCR is witnessing the biggest overhang, there is demand in the segment priced between Rs 65 lakh to Rs 85 lakh. It’s the luxury segment that is not selling. The industry is facing delay and deferment in decision making as people are not finding the right excitement to make a decision. I feel that it is a very good time to buy as the properties are ready, prices are stable, loan rates are not too high, and also there is stability at the Centre. If we have to kick start the sentiment we have to do something that catches the imagination of youngsters. We don’t need half-hearted approach from the government.
How do you see the Housing for All mission being achieved?
If you look at the auto sector, in late 90s the government provided the right incentives and it flourished. They should incentivise, make land available and also make sure that Real Estate Regulatory Authority is quickly adopted by states. The time gaps for approvals are so long that it raises the holding cost of land and the entire project becomes unviable. The government is trying to bring a fundamental change.
I think, government agencies such as development authorities and housing boards should also be brought into the picture as they have built large number of houses in the past. We should make it a public private partnership where land acquisition is done by these government agencies and construction, development and allotment is done by private players.
While the mass segment is picking, what do you think will lead to sustained recovery?
The volumes will continue to come from six major cities but growth for the economy will come from Tier II and Tier III cities. I think employment generation is very important. While metros are chock-a-block, we should incentivise service industry which can be set anywhere including smaller cities. State governments should promote employment in smaller cities. While there is currently demand in the tier II and tier III cities, these cities need employment very badly, else it will all get closed.
How do you see RERA changing things for the sector?
RERA puts lot of embargo on developers during construction period and so I think that it will lead to a lot of FDI in the real estate sector. Also, if developers confirm fully with RERA then it may result into end of pre-launches, faster turnaround of projects and we will see more ready-to-move-in flats getting sold. Developers will first get their land, take approvals, access the funding and build it and sell it. It will also not attract service tax. RERA will also lead to consolidation of developers because not everyone will have the ability to follow RERA.
While there are talks of ease of doing business, how much has come to the sector?
Unfortunately the land laws and approvals are state subject. This government has at least got the RERA out, which is a model code of conduct and its now up to the states. Now the Centre has got nothing to do. While many states have not made much progress on it, a few of them such as Gujarat, MP, Rajasthan and to some extent Maharashtra have made progress.