With the recent suggestion by Finance Minister P. Chidambaram for reducing prices of housing stock, CREDAI has taken a positive step and urged all 8,000 members in India to consider the proposal seriously.
CREDAI National President Lalit Kumar Jain requests Chidambaram and the Government of India to look at suggestions to revive the realty industry. He says, “We are happy with proposals by the Finance Ministry to help developers. We are confident that they will encourage plans like single window system of clearances to speed up the process, banks to reduce interest rates and affordable housing.”

Reducing prices is great for buyers, but other factors need to be looked at. Anuj Puri, Chairman and Country Head, Jones Lang Lasalle India, says, “Ground realities of the development business need to be factored in. The general impression is that high prices being quoted by builders stems from a profit motive. While profits are definitely an objective in any business, builders have been paying a lot more for developing projects. Obtaining 57-odd permissions to begin construction takes two years and cost of holding land also rises. Builders have to cover several external and internal charges, which have also risen.”

The buoyant demand in the residential sector in Mumbai will ensure prices remain status quo, believes Manju Yagnik, Vice-Chairperson, Nahar Group. She says, “Developers are as pricesensitive as customers, due to unprecedented escalation in construction costs. With profits and sales under pressure the cost of funds has increased. Developers with large locked-in inventories may have to look into price-correction. Projects that enjoy a niche status and a good location will continue to command existing price. If the Government desires to bring down prices in the low cost housing segment, it would have to take some proactive incentive based measures benefiting developers and end users.”

Developers have already begun pricing projects at best rates for buyers. Bharat Dhuppar, Chief Marketing Officer, Omkar Realtors, says, “Omkars’ projects have already taken this into consideration. All our projects are priced as best value for money in that locality and can be easily compared to the competition around.”
A customer friendly approach is essential with the present scenario of the real estate market, believes Samarjit Singh, Managing Director, India homes. He says, “Developers find it challenging to adjust prices as cost of land has been rising. But, with changing dynamics of the market, developers have to understand consumer’s needs too. This step from the Finance Minister is a good wake up call for the entire developer community.”

Welcoming CREDAI’s suggestion, Sanjay Dutt, EMD – South Asia, Cushman & Wakefield believes that lowering prices by a slight margin, developers might attract demand. He adds, “This will be applicable to locations which are price sensitive. While maximum benefit will be for peripheral and suburban locations where target segments need relief on pricing, given cost dynamics, developers do not have enough margin for significant price corrections.”

Emphasising on the need for Government support on the said proposal, Gopal Sharma, GM, Marketing, Gundecha, opines, “There are certain areas or land that is vacant and can be used to build affordable homes. The market doesn’t work according to how we want it to, it needs demand and supply. Moreover there are several costs involved in construction that have risen considerably.”

A price reduction in existing projects is not possible as cost for development has already been incurred avers Manoj John – VP: Corporate Planning and Strategy, RNA Corp. He says, “There is future opportunity for reducing prices, provided the government supports it by bringing key reforms on bank lending norms to the sector, multi-level taxation and special incentives for affordable housing, reducing cost of approvals.

Dutt concludes, “With estimated housing shortage of 11.8 million units for 2012-2016 and soaring capital values beyond affordable levels, price cuts will give a huge boost to housing demand. A joint effort by the Government, financial institutions and developers may be the only way to find a lasting solution for keeping demand buoyant.”

Source: Times Property, The Times of India, Delhi/NCR