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Indian property still in negative territory, JLL says

Dubai - "One year is not a very long time to measure the government's performance and its impact on a sector as huge as real estate which contributes almost 11 per cent of the country's GDP."

The Indian real estate sector has not come out of the slump to register growth. The sector requires more government action to overcome challenges and set a right direction, according to a senior executive of JLL India.
Ashwinder Raj Singh, chief executive for residential services, JLL India, said the real estate market is not currently offering good returns to investors. Except Delhi and Mumbai, returns in the real estate market are in negative territory and the industry requires immediate government attention to move into positive zone, he said.
"One year is not a very long time to measure the government's performance and its impact on a sector as huge as real estate which contributes almost 11 per cent of the country's GDP. However, it has to be done to track if the policies being envisioned and followed are bringing the desired results. If I have to describe the performance in one word, it would be: unsatisfactory," Singh told Khaleej Times.
"There are no visible policy changes, the cost of borrowing is still high despite lowering of interest rates by the Reserve Bank of India (RBI), there is still no single-window clearance system and the prices of building materials are not regulated enough, leading to high cost of construction," he said. "In short, if you want to sell your property, you will not get the right price and even if you do make some profit on investment, it will be offset by tax liabilities and inflation," he added.
Land Acquisition Bill
Singh said the government is only concentrating on passing the Land Acquisition Bill. "The answer to the logjam is to muster the support of like-minded parties in the upper house of Parliament. The government's promises to kick-start the economy and double-digit growth, etc., are dependent on this Bill, without which growth will stall.
"Manufacturing will not take wings, neither will the 'Make in India' campaign be successful. Hence, there will be no substantial increase in jobs and the direct impact on the real estate sector will be visible. The sector is already facing a shortage of 18 million urban units."
The Real Estate Bill
Singh said there were great expectations from the Real Estate Bill. But now, it is being sent to a review committee and there is no clear timeframe about its passage in Parliament. "This is a legislative issue that needs to be sorted out to smooth the construction process. With its passage, approvals will come on time, cost of construction will come down, corruption will be dramatically reduced and the gap between demand and supply will be reduced. It is up to the government to find ways to get the Bill passed," he said.
Affordable housing
The JLL India senior executive said the government's vision of housing for all by 2022 is a non-starter. It is like paying lip service, given how difficult it is to achieve the goal at the current pace of development. "To achieve that target, 2.34 million homes will have to be built every year. As per the latest update ending year 2012, only 1.2 million homes were being constructed. No doubt, if the plan is put into action, it will help the real estate sector. But at the moment, there is no progress in that direction," he said.
Smart cities
Singh said the government's plan to set up 100 smart cities had created euphoria when it was announced, but without the crucial Land Acquisition Bill, the project may never see the light of day despite an allocated budget of Rs48 billion. "The planning for such a mega project isn't going at a pace to hold any promise," he said.
Bearish rupee outlook
While the rupee is showing bearish trends in the medium to long term, Singh said it might help if the currency falls against the dollar. Even if "we are seeing the rupee falling steadily against the dollar, it is still one of the strongest currencies" in the world.
"As per experts, the current level of 64-65 against the dollar is good for exports and will help in correcting some imbalances, thereby reducing complacency in the rupee. Also, the RBI is closely monitoring the rupee and will not let it appreciate beyond the comfort level of 61 to 62. Neither will the RBI let it slide to levels of 69 to 70, which, according to some economists, is the right place for the rupee, given the current global economic scenario.
"The rupee will not collapse until there is a major global trauma. With this bearish medium- to long-term forecast about the currency, it would help the NRI diaspora to wait before making investments.
"All the major indicators point towards the rupee losing some shine against the dollar. This will prove beneficial for NRI investors," Singh concluded.
- muzaffarrizvi@khaleejtimes.com

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