No cheer for real estate: ASSOCHAM

Investments attracted by sector from various public and private sources across India have declined by six per cent in past four years i.e. from a level of Rs 15.2 lakh crore as of 2011-12 to about Rs 14.3 lakh crore as of 2014-15, apex industry body ASSOCHAM said.

“However, there has been a slight increase of just over two per cent year-on-year in the investments attracted by realty sector i.e. from a level of Rs 14 lakh crore in 2013-14 to Rs 14.3 lakh crore in 2014-15,” noted the sector-specific survey conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“Ownership-wise, private sector accounted for lion’s share of 85 per cent of the total investments attracted by the real estate sector across India while government/public sources accounted for remaining share of 15 per cent,” according to the analysis carried out by the ASSOCHAM Economic Research Bureau (AERB).No cheer for real estate: ASSOCHAM

“Real estate projects with about 76 per cent of the total investments attracted by the sector remained non-starter as of the aforesaid period,” said Mr D.S. Rawat, secretary general of ASSOCHAM while releasing the findings of the chamber’s analysis.

“Maharashtra (21 per cent), (14 per cent), Gujarat (13 per cent), Karnataka (12 per cent) and Haryana (eight per cent) are top five states with highest share in total investments attracted by the real estate sector in India as of 2014-15,” further noted the ASSOCHAM analysis.

Clocking a compounded annual growth rate (CAGR) of about 82 per cent, Assam has recorded maximum growth in attracting investments in the real estate sector during 2011-12 and 2014-15 followed by Bihar (19 per cent), Odisha (17 per cent), Uttar Pradesh (16 per cent) and Uttarakhand (12 per cent) amid top five states in this regard.

While Jharkhand (40 per cent), Himachal Pradesh (37 per cent), Madhya Pradesh (29 per cent), Haryana (16 per cent) and Gujarat (seven per cent) have registered maximum fall in real estate investments, according to the ASSOCHAM analysis.

The ASSOCHAM Economic Research Bureau had also conducted a survey to ascertain ‘Implications of Union Budget announcements on real estate sector,’ and interacted with as many as 100 small and big companies operating in realty sector in top cities of Ahmedabad, Bangalore, Chennai, Delhi, Hyderabad, Indore, Jaipur, Lucknow, Mumbai and Pune.

Majority (75 per cent) of the total real estate developers interviewed by ASSOCHAM Economic Research Bureau (AERB) at aforesaid centres felt let down by the Union Government for lack of focus on improving demand/supply in the sector.

Highlights of ASSOCHAM’s survey conducted primarily vis-à-vis industry’s view on real estate sector-specific budget proposals:

  1. Increase in rate of service tax to 14 per cent will make real estate a bit more expensive and impact sales as it would wear down the purchasing power of an average consumer.

Real estate developers are also concerned about increase in service tax on construction and excise duty on input goods, as also increased on petrol and diesel coupled with increase in freight rates on cement will lead to rise in construction costs.

  1. The survey indicated that the Union Budget disappointed the realty sector with exclusion of the plan for ‘100 smart cities,’ in the country.
  1. No additional incentives were announced to promote affordable housing sector which is already facing problems in form of high costs and low margins.
  1. Referring to urgent need for speeding up procedural requirements for real estate sector, the industry has pressed for a single window clearance system for various approvals leading to operational efficiencies and cost saving. Respondents also indicated that there is a need for a predictable and stable policy framework.
  1. Many developers also said they expected some announcements related to lowering of land cost, measures leading to quick approvals and grant of infrastructure status to the real estate sector.