Comprehensive reforms needed in Real Estate & Housing Sector: CII

Seeking comprehensive reforms in the Real estate and Housing sector, CII in a report submitted to the Government, has suggested that the Real Estate & Housing sector should be accorded an “Industry Status” and the Integrated Township development activity be accorded an “Infrastructure Status”.

With strong backward and forward linkages with more than 250 industry sectors including cement, steel, brick, timber, building material, etc., the Real Estate and Housing sector has played a catalyst role in India’s growth story.    This sector has been operating under unfavourable policy and taxation environment, which has resulted in it’s growth potential not being fully realised.  

Seeking a new and proactive approach for growth of this sector, the CII report has stressed that “Industry Status”  to “Real Estate & Housing” should be the cornerstone of the new policy.   “Industry Status” would bring about a major transformation in terms of outlook of the Industry.  It would stimulate investments and inculcate corporate culture and industry discipline, which will immensely benefit both economy, in general and consumers in particular.   The “Industry status” will also help the sector access bank lending at a competitive interest rate at low collateral values as against high risk rates prevailing at present.  One of the reasons of high cost of real estate and housing in India is the cost of finance.  A major part of the housing loans constitutes loans to individuals in the higher income group.    Only 5-7% of the loans disbursed by the housing finance companies reach to builders / developers.  In the absence of loans available from financial institutions,  most of the developers access funds from private sources of finance at high interest rates, which ultimately leads to higher real estate prices.    

CII in it’s report has also sought “infrastructure Status” for “Integrated Township Development’, which is almost akin to development of SEZs with complete set of infrastructure facilities.    Several real estate developers are engaged in undertaking large scale urban development projects including purchasing raw land and developing it for the purpose of construction of houses, multi-storey buildings, creation of infrastructure and social facilities. Real estate developers would need incentives for creating such an infrastructure in the country, it added.  

Expressing concern over the growing shortage of houses, which is expected to cross 26.5 million dwelling units by 2011, CII report cited availability and cost of land as the single most crucial factor affecting the cost of housing in India.  It strongly recommended structural reforms such as increase in the municipal limits of the existing cities with a time bound plan to build infrastructure, simplification of process of conversion of land from agriculture to residential / commercial, relaxation of Floor Area Ratio (FAR) to make available constant supply of large parcels of land for affordable housing.   At the same time, Section 80 IB of the Income Tax Act could be reintroduced, exempting companies, which enter into building of lost cost housing, the CII report said.