CREDAI blames ‘impediments’ for sector’s non-contribution to economy

C. Shekar Reddy

New Delhi: The Confederation of Real Estate Association of India has blamed the rising land price, labour and input costs, high cost of funding, drying of cash flows, undue delay in clearances among others, for the sector’s insignificant contribution to the growth of Indian Economy.


Addressing a conclave here with a theme, "Housing the Game Changer - Leading to Double-Digit GDP Growth", C. Shekar Reddy, President CREDAI National, has touched upon several issues haunting the sector, which he said, if measures are taken with right perspective, the industry will create huge supply of homes, there-by bring down the home prices.

Reiterating CREDAI’s resolve to bring in 'Single-window and Online Approval System' to facilitate the growth, he said, “The approving authorities will have to do away with their processes which are sluggish and cause inordinate delays in project plans approval etc which translate into a cost escalation of 35 - 40 percent in the construction costs.

Advising the Central and State governments to institute 'Single Window - Online Approval Mechanism' as a mandatory reform in the proposal for Rajiv Awas Yojna instead of an optional reform and get it implemented at the earliest, hen also urged the government to do away with the Floor Space Index (FSI) concept, take the approval process online and reduce tax burden on the industry.

He blamed the multiple taxation system for the escalation of home prices and reiterated that the sector’s tax burden should come down to less than 15% from the present level of 30-40%.
Citing the FSI norms adopted by Andhra Pradesh government, he appreciated the state government, saying, "Through an order, AP government has removed the concept of FSI thereby allowing the developers with unlimited FSI for the projects abetting wider roads and having bigger plots. By this simple initiative, even with higher land costs, the flats are working out to be less expensive making the houses affordable.” He urged other states too to do away with the FSI concept and help the homebuyers.

Commenting on the issue of funding for the real estate sector Reddy said, "The realty sector faces several restrictive norms in accessing bank finance. Here the funding to the realty sector is just three percent to developers, and 9 percent to home buyers. Due to inadequate funds access by the developers the growth of the sector is stunted. If the funding is made available from the banks the growth of the sector could be raised and costs of the houses could be brought down."

He expressed his concern while comparing the lending percentages with other countries. On the issue of Taxation, Reddy addressed that the National Habitat Policy suggests that the total registration charges has to be a maximum of 3% and urged the government to consider it as a mandatory reform of RAY and advice the states to implement to bring down the tax on housing.

Referring RERA Bill, ‘an act targeting against developers’ he said, other stake holders such as urban local boards, electricity authorities, fire departments are not part of the proposed Bill and if the bill with present provisions was passed, it would increase the cost of the housing by about 30%