HYDERABAD: “Government policies for real estate industry are short sighted. It is creating hurdles in giving permissions on account of GO 45 for the last nine months. This order will let earmark 20 per cent of developed land for economically weaker sections and lower income groups category in all housing projects. It is not the responsibility of the developer to provide housing for weaker sections. However, it is the responsibility of the government. Mostly, developers are catering to the middle class segments. Is it fair to impose the burden of providing housing of weaker section on the middle class families? This order will increase the costs minimum up to 20 per cent for all buyers,” said G Yoganand, president of Hyderabad Chapter of Confederation of Real Estate Developers Associations of India (CREDAI). Can a developer part with a club house or a facility in a residential complex, he asked.
He said,the real estate sector is already suffering from high input costs and heavy taxation. This GO will further hinder the development of the industry.
The banks are also playing the role of obstructers by offering car loans at lesser interest rate of 8 to 9 per cent on high priority even though it is a depreciating asset. However, for an appreciating asset like real estate, they are offering loans at 11 per cent to the property buyers and 14 per cent – 15 per cent for the developer.
The Reserve Bank of India (RBI) believes that financing real estate is highly risky. Banks have to keep 1.25 times of the loan amount in bonds as security to the RBI. This gives rise to higher interest rates for the developers. Eventually, these high interest rates are pushing the costs of the property up. “The RBI has to change its perception and has to offer at reasonable interest rates,” says Yoganand.
Real estate industry is the face of the nation for attracting foreign investment. It is the second largest employment generator and contributes 35 per cent and 40 per cent of the unit price as revenues to the government. Developing real estate will enable the growth of different industries that are supplying raw materials. New malls and commercial spaces help to bring in new businesses in the city which will create new employment opportunities. They also increase revenues to the government in the form of taxes. It is high time for the government to understand real estate is not solely a revenue generator but also enables revenue generation from different spheres, he concluded.