Policy Perils Keeping India's Realty Industry Static

On one hand, funds to the real estate sector have been drying up. On the other, interest cost as a percentage of sales has grown from 12 percent two years ago to 18 percent now, making debt repayment difficult for developers. To make matters worse, debt restructuring, or loan re-casting, has been made difficult by banks on the directives of the Ministry of Finance .
One fails to understand why the government is fighting shy of granting infrastructure status to real estate to help it access cheaper capital, especially when the ministry concerned has already recommended it.
Now, the Reserve Bank of India's recent directive to ban the subvention scheme has closed the option of raising cheaper finance, despite the fact that there have been hardly any defaults. The long and cumbersome approval process is further adding to the prevailing real estate crisis.
There's an urgent need to lay down guidelines that prescribe simple, transparent and time-bound procedures to fast-track building approvals. Unfortunately, the Real Estate Regulatory Bill has overlooked this important aspect. But an expert committee set up by the ministry recently has come up with a reform blueprint in this regard. One hopes it gets implemented to check large-scale delivery delays that not just add to the cost of the property but also shake the confidence of the property buyers and investors.
A recent study by global property advisor CB Richard Ellis has said the real estate sector can double its share in the country's gross domestic product (GDP) to 13 percent, provided the cost of borrowing is reduced, approval process is fast-tracked and bottlenecks in infrastructure are removed. It's time the government pro-actively took initiatives on the policy front to not just revive real estate but also to put it on fast track.

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