Prospects of a stable government at the Centre have raised hopes of better days for India Inc, specially the real estate sector, which has suffered severe margin erosion and is beset with swelling inventories. After the elections threw up a clear mandate in favour of the UPA, stock markets soared, pushing the realty index up. Industry watchers believe this will have a bearing on the realty sector as a whole.
As a result of the ripple effects of the global economic slowdown, the sector saw sales dip by 70 per cent across the board. Weighed down by swollen inventories and cash crunch for nearly a year, developers are hoping that the improved sentiment will translate into business for them.
Says JC Sharma, managing director of Bangalore-based Sobha Developers, “The biggest outcome of the elections is the air of stability that it has created. This will definitely improve market sentiment and that, in turn, will translate into sales very soon.”
Others echo his view. Rajesh Vardhan, managing director of Mumbai-based Vardhman Group, says that investing in infrastructure development can provide an impetus to the economy to move towards recovery at a quicker pace. “The past two months have seen foreign institutional investor inflows of almost $2 billion. A strong and stable government can help the economy attract foreign investors,” he says.
One segment that received a boost is affordable housing. Most big names entered the arena to sustain themselves through volume sales. “The challenge lies in providing housing solutions to all segments. To make this happen, the government should go out of city centres and develop infrastructure,” says Vijay Jindal, chairman and managing director of Ghaziabad-based builder SVP Group.
At present, due to lack of infrastructure, real estate projects can be developed only in existing townships, and these are already overcrowded, he adds. “The emphasis should be on creation of new areas with infrastructure and facilities rather than further developing existing urban areas. The government should impart added thrust to development of infrastructure such as roads, electricity, sewage disposal and water supply in the country so that more land can be made available for housing development,”
he adds.
Developers also feel that the government should provide a greater impetus to those involved in the segment. They are also seeking tax concessions for those involved in developing affordable housing. “Specific tax concessions should be given to those involved in providing affordable homes, by which I mean homes within the price range of up to Rs 20 lakh. This segment really needs to be propped up and so those involved should be given a tax holiday,” says Ravi Ramu, director (finance), of Bangalore-based Puravankara Projects:
Irfan Razak, chairman of Bangalore-based Prestige Group feels that even customers need to be enticed. “There should be some benefits for buyers. Incentives such as a tax breaks for those buying affordable homes could also be considered,” he says.
Foreign direct investment (FDI) in realty is another area that has the potential to boost the sector but there is no clarity on the issue now.
“We also hope to get clarity on FDI in retail. The real estate industry requires liberalisation in the retail sector for the much-needed fillip, especially now when the sector is reeling under a slowdown. With the opponents of FDI in organised retail biting the political dust in 2009, retail players are hoping to expand, especially by way of foreign investments,” says S K Sayal, director and chief executive officer of Delhi-based Alpha GCorp

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