What Are The Possible Solutions To The Problems The Real Estate Sector Is Facing
For a prospective homebuyer, this is the most challenging time to invest. They know under-construction projects could be delayed interminably. It is well known to them that the ready-to-move-in units located in 'hotspots' would cost them a bomb.
Developers have problems of their own. Since buyers won’t buy and banks won’t lend, they are finding it increasingly hard to complete their pending projects, even as huge inventory is turning into a cause of concern. As a result, several of them are on the verge of shutting shop. Since all is not well with India’s real estate market, let us try to gauge what could change things for better.
Make RERA a one-stop shop
No doubt the real estate regulatory authorities have made a homebuyer’s life much easier. The same is true of genuine builders, too. However, duplication of work among authorities has emerged as the biggest area of concern after the arrival of the real estate regulator. In several cases, consumer courts and the insolvency tribunals are running parallel trial cases against the same builder. While the key function of all these bodies is to empower the consumer, duplication is more hurting than healing. So, there is an acute need for a process to be set for such cases.
Create stress fund for projects
Presenting the Interim Budget In February this year, the then finance minister Piyush Goyal had indicated the government would establish a stress fund for developers whose projects were stuck, causing problems for lakhs of buyers. That promise remains unfulfilled.
Recently, in a letter written to finance minister Nirmala Sitharaman, the Forum for People’s Collective Effort has mentioned that most ongoing projects have not been completed and to end this problem, a 'stress fund' to the tune of at least Rs 10,000 crores should be created. Developers are hopeful the government would make an announcement in this regard soon.
Get the trust back
The negative publicity involving big developers such as Amrapali and Unitech, has impacted the credibility of the developer community. The trust deficit thus caused, is making the sector bleed as sales numbers refuse to pick up despite the many efforts the government has made to push them. It has become imperative for the builders to build trust among consumers by creating an effective brand strategy. This may include inviting homebuyers to their existing or ready projects to showcase their quality construction or introducing referral programme for their existing customers and staying active on social media to counteract any negative publicity.
Boosting employment opportunities
Real estate contributes significantly to the country’s GDP, being the second biggest employment generator after agriculture. A boost to the real estate sector through fresh funding and favours from the government can create new employment opportunities for all allied sectors (there are at least 200 of them).
Also, incentives have to be given to corporates to come up in peripheral areas where most of the affordable housing projects are being constructed, to make them usable. Even though the finance minister has opened up various sectors for foreign direct investment, India’s tax structure and ease of doing business need a marked improvement to make the world’s biggest democracy an attractive place to start a business.
“Segments such as the logistics & warehousing sector, co-living and co-working, senior living, educational institutions and special economic zones, offer opportunities to developers in real estate. However, to be an active player in these segments, it is imperative that the development firms are supported with ease in regulations and simplified rules governing these segments,” said Rajeev Talwar, chairman, NAREDCO.
Focus on rental housing
“Nearly 50 per cent of people live in rental housing throughout their lifespan in developed countries like the US. India can also adapt and adopt similar housing practices to meet its gigantic need of providing a roof to its vast population at affordable prices and any of the preferred locations,” says Niranjan Hiranandani, national president, NAREDCO.
According to a Pricewaterhouse Coopers report titled Emerging Trends in Real Estate, developers are looking at co-living as a way to pack more people into smaller areas as cities are becoming denser and housing costs rise. The government has already put out in public domain the Model Tenancy Act to encourage renting. The onus is now on states to adopt the model act and make renting more lucrative for tenants as well as landlords.