'Realty boom will last for 10 years'

Risk-taking and speculation are essential ingredients for the staggering growth currently being witnessed in the real estate industry, said Kamalesh Chandra Chakrabarty, chairman and managing director, Indian Bank.

Delivering the keynote address at the inaugural session of a two-day CII summit on 'Emerging Trends and Opportunities in South India's Real Estate Sector' in Chennai, he said that the real estate industry was being viewed by speculators and risk-takers as a field for higher returns like the share market.

The players should first ensure that they have sufficient stake in projects and survival spirit, if they are to succeed, Chakrabarty said.

"Those who enter the real estate industry with their own money will never lose, irrespective of changing business cycles," he said.

Noting that there are no signs of cooling in the industry yet, he said that if the return on the investment continued to be more than what an equity market would offer, then it would attract speculators.

"The Indian real estate industry, estimated to be worth $12 billion, is growing at a CAGR of 30 per cent. With housing and real estate accounting for six per cent and seven per cent of the GDP respectively, the current real estate growth is expected to last for the next 10 years, provided the industry becomes a part of the inclusive growth and behaves responsibly to the needs of society," he said. "If the cost of housing goes up, find ways to make low-cost housing a reality and meet the society's needs," he said.

While noting that the real estate industry in the country was in nascent stage, he said the current price increase appeared genuine.

The industry should not artificially cut down prices, instead it should increase the supply, he said, observing that non-serious players were never concerned about the supply side.

"We must try innovative ideas to strengthen the supply side," he said.

The industry should welcome regulations and policy interventions. The government should encourage growth in manufacturing or service sectors, but it should regulate real estate industry for the simple reason that "we don't have a technology to export real estate" if a real estate property becomes unviable in a particular location, he observed.

Chakrabarty called for improvement in construction quality. Measures should be taken to create housing infrastructure for the underprivileged. The archaic tenancy laws, high stamp duties, high transaction cost and unclear ownership titles were some of the major issues that the industry was facing, he said.

The real estate demand in the country is on the upswing, and by 2010, the industry is expected to be valued at $50 billion, according to CII figures.