Why real estate prices are going up?
Delay in regulatory approvals and heavy taxation are the major factors that add to property prices, says Confederation of Real Estate Developers Associations of India (CREDAI). During the two-day conclave which started in New Delhi today, the various office bearers of the association pointed out the factors responsible for increase in property prices. “The state governments have taxed the real estate sector quite heavily. We will be happy to reduce the prices. But there is no scope to do it,” says Lalit Kumar Jain, chairman, CREDAI, and chairman and managing director of Kumar Urban Development Limited. According to Harsh Patodia, president, CREDAI, West Bengal, and managing director of Heritage Realty Group, the real estate sector requires the long-awaited single window clearance system to get all the necessary approvals for the projects.
The delay in getting approvals directly increases the cost of a project. As per the World Bank’s Doing Business 2013 report, out of 185 economies, India ranks at 182, in terms of getting construction-related approvals. A real estate developer, in order to start construction, has to get as many as 34 procedures from dozens of government departments. On an average, it takes more than 196 days to get through all these procedures, says the report. However, there is no set timeframe within which a developer should receive these approvals. It may take years to get all the permissions and it is mostly at the discretion of the concerned authorities.
The Real Estate Regulatory Bill, which has got approval from the Parliament and is waiting for the President’s consent, has several provisions to streamline the real estate sector operations. However, ironically, there is no provision that deals with the approvals. Citing another major issue flying in the face of the real estate sector, Getambar Anand, president elect, CREDAI, Chairman and Managing Director of ATS Infrastructure Ltd, said: “The Reserve Bank of India (RBI) should help the sector with funds with lesser rate of interest.” C Shekar Reddy, president, CREDAI and managing director, CSR Estates Ltd, said that the real estate sector has immense potential to contribute to the growth of the economy in a significant manner, provided the government addresses some of the major concerns in a time-restricted program.