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Indian Real Estate and Hosing Sector needs Reform

Submitted by on Monday, 9 March 2009No Comment

The real estate & housing sector should be accorded an `Industry Status` and the integrated township development activity be accorded an `Infrastructure Status`, suggested the Confederation of Indian Industry (CII) to the government while seeking the comprehensive reforms in these sectors. This sector has been operating under unfavorable policy and taxation environment, which has resulted in its growth potential not being fully realized.

Real estate and housing sector has played a catalyst role in India`s growth story with strong backward and forward linkages with more than 250 industry sectors including cement, steel, brick, timber, building material, etc. Seeking a new and proactive approach for growth of this sector, the CII has stressed that `Industry Status` to `Real Estate & Housing` should be the cornerstone of the new policy. `Industry Status` would bring about a major transformation in terms of outlook of the Industry. It would encourage investments and hammer corporate culture and industry discipline, which will immensely benefit both economy, in general and consumers in particular. The `Industry status` will also help the sector access bank lending at a competitive interest rate at low collateral values as against high risk rates prevailing at present.

The cost of finance is one of the reasons of high cost of real estate and housing in India. A major part of the housing loans constitutes loans to individuals in the higher income group. Only 5-7% of the loans disbursed by the housing finance companies reach to builders / developers. In the absence of loans available from financial institutions, most of the developers access funds from private sources of finance at high interest rates, which ultimately leads to higher real estate prices. CII has also sought `Infrastructure Status` for `Integrated Township Development`, which is almost akin to development of special economic zones (SEZs) with complete set of infrastructure facilities. Several real estate developers are engaged in undertaking large scale urban development projects including purchasing raw land and developing it for the purpose of construction of houses, multi-storey buildings, creation of infrastructure and social facilities. Real estate developers would need incentives for creating such an infrastructure in the country, it added.

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