Developers Debate Unaffordable Land Prices

by : Propertiesmls

Unchecked speculation in Northern India may have resulted in land price correction, however, other parts of the country have yet to witness a land price scale down. One way to ensure it, is by increasing land suppy, which presently constitutes 50% of total project cost, and is largely responsible for the high cost of land. At a recent Real Estate Conference organized by Confederation of Indian Industry (CII ), the general consensus was that increasing land supply was the key to affordable housing.

Parag Munot, Executive Director, Kalpataru Properties Pvt Ltd., points out that demand for real estate may have gone up, however, supply and infrastructure remain unimproved. Ashish Raheja, Managing Director, K Raheja Universal Pvt Ltd. believes that as long as current pricing does not come down, affordability will remain an issue.

Sunil Rohokale, General Manager - Head Mortgages and Real Estate, ICICI Bank Ltd. states, demand has outstripped supply in the mortgage industry, and there are far too many people chasing the same asset.

Sunil Mantri, Chairman, Mantri Group is of the opinion, the current slackness in the Indian real estate market will disappear with the onset of Dussera and Diwali. Whereas, Harshavardhan Neotia, Director, Bengal Ambuja Housing Development Ltd. is of the opinion that the current scenario offers few low income and middle income housing viability options to developers. He believes developers should be given access to land at cheaper prices by the government.

Dharmesh Jain, Chairman & Managing Director, Nirmal Group of Companies emphasizes that until supply increases, land price reduction will remain just a mirage, adding that as long as there are ten buyers for one flat, the problem will remain. Similarly Ramesh Jogani, Chief Executive Officer & MD, Indiareit Fund Advisors Pvt. Ltd., stresses major issues are affordability and the system's bank liquidity. What the government needs to do is to promote large format schemes within a specified time period. Anuj Puri Conference Chairman & Chairman and Country Head, Jones Lang LaSalle Meghraj, says, while unchecked speculation in North India saw price correction in land cost, without the change being reflected in other parts of the country.

Anil Harish of DM Harish & Co feels the emphasis should be on creation of new areas with infrastructure and facilities, rather than developing existing urban areas. K. Srinivas, Managing Director, Gujarat Urban Development Co. Ltd., highlights the fact that close to 50% of 'close to urban' areas can be urbanised, but are not used for urban purposes.

Ness Wadia, Joint Managing Director, The Bombay Dyeing & Mfg. Co. Ltd., highlights the soaring land prices in metros like Mumbai. Pawan Malhotra, Managing Director & CEO, Mahindra Gesco Developers, feels building office spaces for small industries offers great development opportunities.

Lalit Kumar K. Jain, Chairman, Kumar Builders believes, commercial spaces have low speculative development, which is primarily for incubation spaces, with little supply side risk. Satish Magar, Chairman & MD, Magarpatta Township Development & Construction points out, a developer will not construct offices without bonafide customers to buy the developed property.

R.N. Bhaskar, Chairman & Managing Director, e-convergence Technologies Ltd., underlines a need to build for the future, whereas RK Agarwal, GM-Corporate Real Estate, Hindustan Lever Limited, emphasizes infrastructure has to be in place, before corporates take up office space. Capt. K. Srinivas, Vice President Procurement & RESO, Mphasis believe, it is useful for corporates to have information about real estate demand and supply, since issues like future scalability need to be considered.
Providing an Indian perspective on easing real estate FDI norms, Niranjan Hiranandani, Managing Director, Hiranandani Group of Companies, says the secret of reducing prices is to create surpluses, which is only possible with the removal of restraints on FDI.

Manish Chokhani, Director & CEO, Enam Securities Pvt. Ltd., points out, the entire issue is really about liquidity and access to capital, followed by regulation. Alex Hayim, Director, REIT Property Management Pvt. Ltd. stressed FDI clarity was the need of the hour, i.e. what can be done and what can't be done.

BS Nagesh, Managing Director, Shoppers' Stop opined that money should bring in quality, which unfortunately hasn't happened, he says. Ajoy Veer Kapoor, Managing Director, Saffron Advisors, explains one has to be realistic, as economics, financial inputs and politics cannot be segregated.

As well, financial and economic constraints of senior citizens have given birth to a whole host of financial institutions seriously looking at entering the reverse mortgage segment, which is a new concept in India. Essentially, reverse mortgage products are loans senior citizens acquire by mortgaging their homes. Heirs either have to repay the loan or forfeit the property. Nuclear families, social and economic conditions have created a great opportunity for this segment, as increasingly senior citizens are left to live by themselves, as children migrate to other cities or countries.
Punjab National Bank (PNB) and Dewan Housing Finance Corporation Ltd. (DHFC) have already launched reverse mortgage products. GIC Housing Finance Ltd. plans to enter this segment in the next 3-4 months. LIC Housing Finance also plans to offer a reverse mortgage product fairly soon, where senior citizens will be given between 40% to 60% of the value of their homes as loan with a tenure of 15-years.

Other institutions like Allahabad Bank, ICICI Bank and Bank of Baroda, amongst others are also evaluating the reverse mortgage segment.

The clarity of reverse mortgage tax implications remaining unclear, has forced Gruh Finance, another such institution to wait before it launches its reverse mortgage products.

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