GST will prompt sates to develop infrastructure to attract realty projects'
Ashok Gupta, MD of Ajnara In dia Ltd, said in an interview with Times Property that areas like Noida, Greater Noida, and Yamuna Expressway, which are known for their world-class infrastructure like roads, Metro network, power supply, sewer lines, greenery are not yet favoured by Fortune-500 companies due to the lack of an international airport.
“Though the Delhi NCR has the IGI Airport in the southwest corner of Delhi, it is not well connected with the eastern side of the NCR.This apart, regular traffic jams in the city have made large corporate houses wary in moving their offices to the eastern part of the region,“ Gupta said.
As a result, not only has demand for commercial real estate been affected-evident from the fact that rentals in Noida and Greater Noida are one third that of those in Gurgaon--but also affected the prices of residential units. Once the airport at Jewar on Yamuna Expressway comes up, Gupta says the value of residential as well as commercial properties would at least double.
Gupta also says that the Real Estate Act that stipulates the establishment of a Real Estate Regulatory Authority (RERA) by each state and the GST will create a businessfriendly environment in the real estate sector.
Ashok Gupta, said that completion and delivery of realty projects on time is of paramount importance in boosting the sector, which is presently going through bad phase.
Due to historical reasons, land in real estate business used to be considered an asset but, in the current scenario, this is no longer an asset--merely a raw material.Therefore, sitting on a land parcel is not a wise thing to do any more due to the high interest rate. So it is always beneficial to focus on completion of a project first, rather than procuring land, Gupta says.
Ajnara Group has strong presence in Noida-Greater Noida and Ghaziabad regions and has already delivered 12,000 housing units in 85 projects. The group is preparing to deliver another 3,000 housing units by March 31, 2017. Besides this, the group has launched another 12,000 units, to be delivered by 2019.
Excerpts from the interview:
THE MARKET IS NOT DOING WELL, ESPECIALLY THE RESIDENTIAL SECTOR; HOW SOON THE MARKET IS LIKELY TO IMPROVE?
>> I must first tell you that the market is not as bad as it is made out to be. We are still selling and the cash flow is good, especially in those projects where work is going on; prices are rock bottom and there is no scope to increase them at present because of the prevailing gloom. But, soon, by April 2017 to my mind, the green shoots will start appearing and market will start moving up.
HOW DO YOU SEE THIS COMING ABOUT?
>> The implementation of GST, the 7th pay panel recommendations, and lowering of interest rates by at least one percentage point will revive the real estate sector in the country. And, in all probability, the last two measures would have been made by April next year. With good monsoon, inflation will be contained and the new RBI governor is sure to cut the rate.
HOW WILL THE GST AFFECT THE REALTY MARKET?
>> With GST, the net tax on building material will be down by around 12 percentage points--to 18%--but the tax on the final products, apartments, may go up by al most the same amount. So, financially, it will be almost neutral.But it will improve the business environment greatly.
Besides, as GST is a destination-based tax system, the government will earn a great deal more if the consumption environment is improved. The construction of houses leads to a huge consumption of cement, steel, and services. Even if I purchase steel from Bokaro in Jharkhand, the tax I pay there will go to UP, as the material will be consumed in UP. Therefore, construction activities will lead to huge income for local governments. This will prompt local governments--in the case of Noida, Greater Noida, Yamuna Expressway, NH-24, and Ghaziabad it is UP--to develop infrastructure, so that a large number of housing projects take off in the region.
WILL RERA HAVE A POSITIVE IMPACT?
>> Of course! We are very optimistic that RERA will bring about greater transparency in the real estate dealings. An increase in transparency will reduce litigations in the sector. Also, with increased transparency, the confidence of buyers will be back and demand for the houses under construction will go up.
This may also help the sector get the long-awaited industry status.The move to comply with the provisions of RERA may push prices upwards in the short term, but we can expect stabilization due to the efficiencies brought in its wake. It will not only help in expediting the completion of current projects but also immunize buyers from fraudulent practices.