Change is a constant. And it waits for no one. The construction industry is changing a great deal due to evolving technologies which is excellent but then there are also those issues that need to be tackled.
The Regional Plan has been repeatedly postponed. Given the political realities the plan is a challenge and will continue to be one for a year or two more.
Then of course, we have the new Real Estate Regulation Act which has been introduced by the Central govt and which is yet to be adopted by the State government. It is in the process and should be done by April –May post elections when the new government comes, it was due in November. This is designed to help the customers who have suffered due to the actions of a few who have been taking people for a ride. Under pressure, the government had to introduce this to streamline the industry. This, it must said, was more prevalent up north than in the south. It will organize the sector and help us get industry status. In the banking world, we are right down in terms of priority. As builders when we go for project finance we are not priority. It is a high risk sector so our interest rates are very high. The value of the land may be high but projects can be delayed indefinitely. This is happening in Noida, NCR sector and outside Mumbai. With this act it will become like any other industry and all you have to do is perform.
The penalties are so heavy, you can’t just fool around. It will clean up the industry. Several builders who operated in a dubious manner will disappear. You have to remember the industry has operated in a certain manner for decades and to meet the regulations, the industry will struggle. Many builders understand the ground realities but actually doing it is another matter.
One of the requirements is that 70% of the money that comes from a customer has to go into a separate account for the project. Money management will be a major challenge. You have to remember there are inherent delays in projects which could result in the ballooning of costs and builders would be under pressure to draw money from that account. There will however also be other advantages. With regulations in place, banks and other financial institutions will agree to finance at a more reasonable rate which will then help in tiding over the cash flow problems. But please remember for all these things to fall in place it will take some time. The teething period of one to two years is going to be chaotic and that’s where the cost will increase.
Next challenge will be to provide affordable housing. In the recent budget the govt has announced affordable housing as an industry. There by giving a boost to affordable housing. I know it is difficult to get anything within that cost in metropolitan cities. Many in our industry want to service this segment because it is a huge market but the cost of land in Goa is so high. Now that the government is giving great incentives for affordable housing particularly given that the demand for flats in the Rs 20-30 lakh is very high. Considering the above the builders have a great opportunity in this segment.
The government has reduced the holding period for long term assets being immovable from 3 years to 2 years. Affordable housing has now been granted infrastructure status. The government has also helped by ensuring no notional tax for developers on unsold inventory for one year from the end of the financial year in which the completion certificate was obtained. The future is bright but it will require a complete reorientation on the part of the industry to cope with the challenges ahead.
