NAREDCO welcomes Finance Minister's initiative to boost Housing and Construction Industry

New Delhi, November 21st, 2008: NAREDCO, the apex Government, Public, Private Sector body welcomes the Finance Minister's initiative to give a boost to Housing and Construction Industry to avert recession in economy. The body with state chapters and operation in districts and cities, assures the government of total support in providing affordable housing to the country by reviewing prices for such housing projects while asking the government to roll back the tax, monetary and credit regulation policies for lower rate of home loans, bank credit to developers and a package to give a fillip to the industry.

The National Real Estate Development Council (NAREDCO) is engaged in promoting nascent real estate industry and safe guarding interest of all stake holders including buyers. It works under the patronage of Ministry of Housing and Urban Poverty Alleviation, Govt. of India and its members include NHB, HUDCO, PNB HFL, LIC HFL, HDFC in addition to leading developers, HFIs and other stake holders from private sector across the country. Few leading developers who are members of NAREDCO are DLF, Unitech, Ansals, Parsvnath, Omaxe, Assotech, Som Datt Builders, Sobha Developers, Eldeco, Raheja Developers, ATS Infrastructure, TDI, Mahindra lifespaces Developers, Vigneshwara Developers, Jaypee, BPTP, Sahara, Shipra, Suncity Projects, Amrapali, Ambience Infrastructure, Purvanchal, Era Landmark, Ashiana etc.

The real estate sector had recorded a growth rate of 25 – 30 percent year on year basis and has been meeting one of the essential requirement of housing which is terribly in short supply. Contribution of Construction Sector to GDP has been around 8.53 percent and it has been one of the main employer for unskilled and semi skilled labour who are approximately 32 millions. The sector supports more than 250 ancillary units like cement, steel, paint, tiles, furnitures etc.

Presently, the strict monetary policies of RBI for real estate projects and high rate of home loan finance by Indian banks, closure of ECBs and rise in interest rates together with stock market crash due to selling pressure of FIIs, have lead to a situation where credit is dried down and buyers are hesitant to purchase.

NAREDCO, had a emergency meeting yesterday and decided to request all its members to "review their prices" of the properties by reducing their cost, cut down on their margin, cutting down advertisement and brokerage cost by becoming more professionally organized and by outsourcing some of the activities and to pass all the benefits to our customers. NAREDCO hope that this step will boost demand to some extent on one side and will benefit our customers who will get a life time opportunity to purchase property of their choice.

NAREDCO feel that though the Govt. of India is taking measures to increase liquidity in the system and bring down home loan rates but it is just not sufficient to rejuvenate demand. Interest rate on home loan should be drastically cut by at least 3 -4 percent so that cost of borrowings can be reduced for a common man.

NAREDCO also feel Govt. of India should take few pro active measures to boost the demand in the sector for more employment creation and to increase the growth rate of our country. Some of our suggestions are as follows:

(a) Rescheduling of bank debt to the real estate developers, with a moratorium of one to two years.

(b) Banks have become more risk averse presently, hence Govt. should advise RBI and banks to aggressively finance real estate projects, without calling it NPA.

(c) Where land is purchased from Govt./Semi Govt. undertakings, then the banks should consider financing the land cost also in addition to the construction cost of the project.

(d) FDI norms related to area and lock-in period should be further eased to encourage foreign investment.

(e) ECB should be allowed for real estate projects.

(f) Housing should be given status of infrastructure.

(g) At present there is a mandatory requirement on banking institutions to provide loans for the priority sector of the economy within a prescribed percentage. With a view to encourage banks to provide finance to the Housing Sector, it is suggested that quantum of loans given to the first home buyer upto Rs. 30 lakhs may be allowed to be included within mandatory quota of the priority sector funding by the bank. This single step will encourage banks to provide more funding to the Housing Sector.

NAREDCO appreciates the steps taken by Govt. of India to boost liquidity in the system and therefore request to take above pro active steps to meet down the challenges posed by economic melt down.

Credit demand of the housing sector should be met at reasonable interest rate by further improving liquidity by RBI. Availability of liberal, easy and short term credit and meeting working capital requirements is the need of the hour, for completing ongoing projects, as also to retain the confidence of the market and to sustain growth.

Real estate sector has the capacity to boost economic growth and create maximum job opportunities. It is, therefore, requested that real estate industry be provided all support and encouragement from the Govt. Urgent action is, therefore, requested from RBI's side to advise the banking institutions accordingly.

Source : Equity Bulls

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