The Indian realty sector should be accorded an “industry status” and the integrated township development activity an “infrastructure status”, the Confederation of Indian Industry (CII) has said in a report submitted to the government.

“With strong backward and forward linkages with more than 250 industry sectors including cement, steel, brick, timber, building material, the real estate and housing sector has played a catalyst role in India’s growth story,” CII said in a written statement.

“This sector has been operating under unfavourable policy and taxation environment, which has resulted in its growth potential not being fully realised,” the report said.

Industry status would bring about a major transformation in terms of outlook of the industry, stimulate investments and inculcate 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.

One of the reasons of high cost of real estate and housing in India is the cost of finance.

A major part of the housing loans constitutes loans to individuals in the higher income group. Only 5-7 percent of the loans disbursed by the housing finance companies reach to 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 in its report has also sought infrastructure status for “integrated township development”, as developers would need incentives for creating infrastructure in the country, it added.

Expressing concern over the growing shortage of houses, which is expected to cross 26.5 million dwelling units by 2011, the CII report cited availability and cost of land as the single most crucial factor affecting the cost of housing in India.

The report also strongly recommended structural reforms such as increase in the municipal limits of the existing cities, simplification of process of conversion of land from agriculture to residential and relaxation of floor area ratio (FAR). 

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