`Unless buyers purchase in projects under construction, the sector will not revive'
Ajay Singhal, promoter director of Avalon Group, and the foremost developer in Bhiwadi and Neemrana, said in an interview with Times Property that the affordable housing segment will be the driver of the real estate market in the near future.
Excerpts from the interview:
IT IS NOW FIVE MONTHS SINCE THE DEMONETIZATION DRIVE AND LARGE DENOMINATION CURRENCY IS BACK IN THE BANKING SYSTEM; HOW IS THE REAL ESTATE MARKET DOING?
The market has improved quite a bit. In the last two months, my company has sold 400 housing units in Bhiwadi, against less than 10 flats till end-January.
Actual buyers are returning to the market to purchase their dream homes. This is a market of end users and prices are down to the lowest possible level. In fact, the current prices are quoting at the level of those during 2011-12.
THERE WAS A GENERAL IMPRESSION THAT PRICES WOULD FALL DRASTICAL LY AFTER THE DEMONETIZATION DRIVE; MANY BUYERS HAVE POSTPONED THEIR DECISION HOPING FOR STILL LOWER PRICES. HOW REALISTIC IS THIS?
I think the situation has changed. There was some speculation in the media that prices would take a steep fall but, now, despite the rise in the price of cement, steel, and labour the current prices have stabilized at the 2011-12 level. It is unrealistic for us to lower prices any further. We are hardly making any money selling at even the current prices, as the margins are very slim--at the lower side of the single digit! Owing to such low margins and the high risk involved in completing projects, few projects have been launched in the normal housing segment recently. At the same time, new jobs are being created and there is a huge build up in demand.
Therefore, contrary to the general perception, prices will start firming up and those who want to buy a house for personal use must close a deal now.
WHEN WOULD THAT BE?
It is difficult to give a time frame. But, as the things are moving, I expect prices to firm up in the coming festival season.
WHY IS SENTIMENT SO POOR?
It is delay in completing the large number of projects in the Delhi NCR and other cities. Buyers lost confidence in developers.This trust deficit affected sales and affected the cash flow in the entire construction sector. This complicated the problem, as this hit even genuine developers too.
I hope the government and development authorities take all the necessary steps to help and complete all the delayed projects.This is of paramount importance in restoring confidence of the buyers in the market and also attract new ones to buy in the just-launched projects. Unless buyers purchase in projects under construction, the sector will not revive and the supply of houses will not be able to match the demand.
WILL RERA HELP IN THIS?
Certainly! RERA (Real Estate Regulatory Authority) will help shore up the confidence of buyers, as they will now be assured that projects would be completed and that they would get their house in a definite timeframe. We have some reservations about a few clauses of the real estate act but, on the whole, it should help the sector revive if it is implemented in right earnest.
THE NDA GOVERNMENT IS FOCUSED ON AFFORDABLE HOUSING SEGMENT. HOW WILL IT HELP THE SECTOR?
The affordable housing segment is going to be the driver of the real estate market in the times to come. There is a huge unmet demand in this segment and the government has tried to address both the supply side and the demand side issues. We hope that subsidies in interest rates under the Pradhan Mantri Awas Yojana (PMAY) will be of great help in prompting end users to buy a house of their own. This should lead to actual deals happening.
DO YOU SEE ANY GAP IN ANY OF THE GOVERNMENT SCHEMES?
The intension of the government is very good. But they must streamline the implementation of each of them so that they can easily be implemented at the ground level.The government must spell out a single definition for affordable housing: at present, each state government has its own criteria in the size of a flat and the density of units.
In Rajasthan, the super area is counted to define both the size and the density.Under the tax law, there is a tax benefit under 80IB for the construction of affordable housing. This will not only prompt developers to build more, but also help them keep the cost low. If this benefit could be availed by the developers constructing affordable housing under the CM Awas Yojna, the benefits will accrue to the buyers ultimately. Similarly, affordable housing has been accorded infrastructure status now.But, for this, I believe the definition of affordable housing would be that of the one under the PMAY.
ARE YOU PLANNING TO LAUNCH AFFORDABLE HOUSING PROJECT?
Yes! We are about to launch 3,000 units on 16 acres, in two phases, in Bhiwadi. It will be under the CM Awas Yojna of Rajasthan. The flats will be between 350 sq ft and 550 sq ft, in the price range of Rs 711 lakh. The bigger one will be `2BHK with two bathrooms' apartments. In this, the interest subsidies are equivalent to Rs 2.40 lakh, which will greatly boost their appeal among the mid-segment buyers.