New Delhi: Premium and luxury segments have emerged as key drivers of growth in the real estate sector in recent years. In the post-Covid period, the premiumisation trend got further momentum, despite the government’s nudge and incentives for development of affordable housing projects. The Confederation of Real Estate Developers’ Associations of India (CREDAI), which represents over 13,000 developers spread across the country, says easier norms and further incentives are required to give a push to affordable housing. In an interview with DH’s Gyanendra
Keshri, CREDAI president-elect Gummi Ram Reddy talks about the challenges in the affordable housing segment and expectations from the upcoming Union Budget for the real estate sector.
Real estate prices have jumped sharply in the past 3-4 years. What is your outlook for the coming years?
Our outlook is positive. In some markets in recent years, the price increase was 20-30% annually. Such a trend is not going to continue. This is not good for the sector. We believe in organic growth. 5-7% growth in price above inflation is good. For the industry, we are expecting 10-12% growth. Trends show 7-8 years of cycle in the real estate sector. It goes up, then there is some lull and it goes up again. So the long-term trend is always positive.
How do you see the progress in the affordable housing segment?
First, there is a need to revisit the definition of affordable housing. There are two key criteria. One is area, the other is price. Area is up to 60 sq metres in metropolitan cities and up to 90 sq metres in non-metropolitan cities. The value is up to Rs 45 lakh, both for metropolitan and non-metropolitan cities. The price is not realistic today. It has not changed for the last eight years. There is a need to change this. Property prices have more than doubled during this period. So we are demanding that the price cap for affordable housing be increased to at least Rs 90 lakh, or there should be no cap.
Then, what is the relevance of calling it affordable housing, when it does not remain affordable for the targeted segment?
This is a very complicated issue. The prices have gone up mostly because of land cost. Land is limited, and because of the population, the prices have gone up and will continue to rise. The developer has no control over it. If you want to make it affordable, the government will have to ensure land at an affordable price and also need to address construction and other costs. Registration cost is also a big element. In some states, it is as high as 12%. All these add up to the cost for buyers. We have suggested that for the affordable segment, registration cost could be brought down to 1-2%. This will directly benefit home buyers.
What are your expectations from the upcoming Budget?
Affordable housing has been a focus. We expect some good announcements on affordable housing. We hope that the price cap will be increased. The real estate sector is the second-largest employment provider after agriculture. The construction sector has been contributing significantly to GDP growth. We are expecting a continued focus on supporting real estate sector growth. Taxation is a major issue. We pay 18% GST on work contracts. It should be reduced to 5%. If the cost goes down, it will be passed on to the buyers. This is very important for the affordable segment.