MoEF guidelines may hit Kerala realty sector

Kerala's construction industry is in quandary. One side, it has to tackle the exploding population which has increased the housing demands multifold and on the other hand the new guidelines floated by the Ministry of Environment and Forest (MoEF) over increasing the building heights. It’s like catch-22 situation for the state as its request to increase the height of the buildings to 15-meters has met with a series of guidelines which would dampen the mood of the property market further. 

As per MoEF guidelines, buildings that are more than five storeys or 15-metre high should have wide roads around them. These guidelines are applicable to Kerala, Maharashtra and Haryana. These three states had approached the ministry for approval to increase the height limit for buildings.

According to the guidelines, a 5-storey or 15-metre high residential or industrial building should have a 15-metre wide road surrounding it. Higher the building, wider the roads! For instance, a 15-storey building should ideally have a 24-metre road around it, TOI reported.

"Considering Kerala's exploding population, if construction and road widening are carried out as per these guidelines, the price of land will shoot up to astronomical levels. Then hypothetically, open spaces and paddy fields will be eaten up by construction works. As far as Kerala's infrastructural development is concerned, only vertical growth is possible," said Antony Kunnel, president of Confederation of Real Estate Developers' Associations of India (CREDAI), Kerala.

The draft also proposes carrying out mock fire drills on an annual basis on all high-rise buildings in the state. "This is a welcome decision, and it should be followed. It will definitely reduce casualties due to fire accidents," said Kunnel.

The draft suggestion to have a fire station within 10km radius of buildings with more than 10-storeys has also been received well.

On March 28, chief minister Oommen Chandy will take up the issue with the concerned representatives. "We will look into it after an official meeting with builders and concerned stake holders in the coming weeks. These are only guidelines and can most definitely be worked on in order to arrive at a consensus," Oommen Chandy's office told TOI.

Developers demand industry status for real estate sector

While a section of the realty enthusiasts expect hosts of sops from Pranab Mukerjee’s Union Budget for 2012-2013, there have been demands from property consultants and real estate developers to award ‘industry status’ to the realty sector.

"Grant industry status to real estate, since the sector is a major driver for economic growth and generates countless jobs across its various verticals and allied industries," Global Property Consultant Jones Lang LaSalle India Chairman and Country Head Anuj Puri told Business Standard.

Anuj also pitched for relaxing norms for repatriation of FDI in real estate to attract more investment in the sector.

Property consultants and developers in general expressed their willingness for incentives to promote affordable housing segment and an increase in the tax exemption on home loans. To boost supply, they have also asked for a single-window clearance for real estate development projects and FDI in multi-brand retail to create demand for retail space in shopping malls.

One per cent interest rate subsidy provided by the government for loans towards affordable housing should be "amplified and broadened" to include a wider price band of budget housing to benefit home buyers.

Expressing similar views, another property consultant in Chennai said that the ceiling of housing loans eligible to priority sector lending should be raised in view of high property rate.

That apart, property consultant DTZ suggested increase in tax exemption on home loans to stimulate end user demand, particularly for mid-range housing.

"Principal repayments should be treated as a separate tax exemption entity and excluded from benefits under section 80C... Deductions towards the total interest payable on the home loan should also be increased from existing cap of Rs 1.5 lakh," it added.

Currently,  an individual is entitled to claim both the interest and principal components of home loan repayments for tax benefits. The ceiling under tax benefits is capped at Rs 1.5 lakh towards the total interest payable on the home loan and Rs 1 lakh for principal paid. This is also part of the 80C available for other investments such as LIC premiums etc.

Confederation of Real Estate Developers' Associations of India (CREDAI) has requested the government to incentivise affordable housing segment and address the issue of high land cost and taxation issues.

"The prices of houses are becoming unaffordable by the day under the onslaught of high land prices, rising cost of construction and high taxation. We would like the FM to introduce some measure like tax exemption for affordable housing," CREDAI Chennai president Chitty Babu said.