The Indian real estate market is expected to touch US$180 billion by 2020. At present, it contributes about 5-6% to India’s gross domestic product (GDP). It is also the second-largest employment generator after agriculture in the country! Despite these positive statistics, the sector has still not been granted industry status.
In 2017, the government accorded infrastructure status to affordable housing. This year, expectations are high to bring the entire real estate sector under the ambit of ‘industry,’ instead of restricting it to only the affordable segment.
What are the benefits of industry status?
- With industry status, developers can obtain easier funding from financial institutions
- Government approvals may be made easier or even fast-tracked
- In the eyes of banks, the real estate sector will become a priority sector with industry status
In the absence of industry status, “Developers are forced to borrow at higher rates, which gets impacted by delays in construction due to the long approval process, which finally leads to an increase in the final cost of the project,” said Niranjan Hiranandani, President, NAREDCO.
With RERA in place, the sector is gradually transforming into an organised one. However, industry status will make it more professional and transparent.
“Infrastructure status will change the reality for real estate by way of easier access to institutional credit and help in reducing developers’ cost of borrowing for affordable projects,” reiterates Manoj Paliwal, Chief Financial Officer, Omkar Realtors & Developers Pvt Ltd.
Reiterating the same, Surendra Hiranandani, CMD, House of Hiranandani said, “Currently most industry rules are applicable to the sector, but denial of industry status for funding will only worsen the slowdown in demand because of erosion of capital.”
Obtaining recognition as an industry will, undoubtedly, help in the faster implementation of policies and improved transparency in the sector.
“It’s a long-standing demand, which has so far gone unmet. The inclusive growth of the real estate sector will help in generating employment across various sectors, which are directly or indirectly related to it,” added Anuj Puri, Chairman, ANAROCK Property Consultants.
The upcoming Union Budget 2019-20 is an ideal time to push such policies. “We urge the Finance Minister to grant infrastructure status to the entire real estate sector,” said RK Arora, Chairman, Supertech Ltd.
Will this expectation turn into reality in this Budget? Watch this space for more updates on the Union Budget 2019.
