Merely reducing interest rates may not be sufficient to bring down housing prices, unless banks and housing finance companies are permitted to fund land transactions – said industry leader and chairman of HDFC Ltd, Deepak Parekh. The price of land influences housing prices and hence needs to be brought down and currently this funding requirement is met by NBFCs and foreign private equity players who fund these transactions at exorbitant rates.
The enactment of the Real Estate (Regulation and Development) Act 2016 is a breakthrough and will bring in the much needed consumer protection. The move towards implementing a digital platform for approvals is a significant game changer bringing in standardization, allowing developers to complete projects on time. The sector will improve with more discipline, less delays and even lesser dependence on speed money. While developers are not responsible for the delay in delivery due to delay of approvals, the Ministry of Urban Development has committed to shifting towards online approvals. Timely implementation is now critical to ensure approvals are granted on time.
The anti-corruption measures by the Government have to percolate further to the local authority levels. Mr. Parekh expressed optimism in the growth of the sector since there is immense support and focus that the government has placed on housing, real estate markets and urbanization. The RE regulator will not have any price determining powers.
On land cost, Parekh said if RBI permits housing finance companies and banks to fund land transactions, at least land that is being used for residential purposes, it could substantially bring down overall costs for the end consumer. Further, with more cross border players and banks funding land transactions within the checks and balances, the government’s objective of affordable housing can be full filled.