Building Affordable Houses

Lalit Kumar Jain
CMD, Kumar Urban Development and President, CREDAI

How is your company focussing on the present market conditions? Are there any new project launches and offerings in terms of low cost or luxurious housing?

Execution and consolidation is our current market focus. Due to the existing sluggish market conditions and the upcoming general elections, home buyers are adopting a wait and watch approach. There is hope that with a stable government coming in power, it will boost the economic development in the country and steady property prices with reduction in interest rates. Considering all these factors also, each project has to be thought from various perspectives; design, amenities and customer needs. Thedifferentiator factor is all important in current times. Our major focus is to provide services to customers with an objective of exceeding the expectation thereby creating customer delight. We believe that there has been a lot of progress on the affordable housing front, a lot more needs to be done to give a boost to this segment of housing.

Looking at the real estate companies, most of them have become asset rich instead of APR 7-20,2014cash poor. The cash poor real estate companies have started building considerable debt burdens which has severely started hampering the companies' cash flows in recent times. What is your take on this front?

Yes, this has been a case with a lot of developers who are now facing huge debt burdens. The line of thinking over a decade back was to buy a piece of land and keep it, which will appreciate over a period of time.This resulted in capital depletion and became difficult for them to raise funds fordevelopment purposes. Today, developers are selling of their land assets to pare of debt burdens that have been piling up. Strategies are changing in the real estate industry with developers now adopting a policy of selling lands and buying land only when required.

If we take the case of land values, they are not coming down. They are at a stable level and even the real estate prices are not showing any signs of easing. Don't you feel price correction is the only option for new demand creation during current market conditions?

Last two years have been challenging both for developers and home buyers. But this year, we are expecting a new stable government to favour the sector so that overall property prices come down to reasonable levels and home buyers can realise their dream of buying a house. But this will take time. New reforms will take time to come into effect. I would suggest buyers to buy now when there is a cash crunch, but the future is looking bright. As far as affordable housing is concerned, we are implementing a report of task force on affordable housing under chairmanship of Arun Mishraji. Single window clearance, rationalisation of tax and ease of funding should be given the go-ahead.Also, prices of raw materials need to come down.

Though there is low cost size housing facilities available, it is still not creating considerable demand for real estate. What are your thoughts on that?

There is a huge demand for low cost housing in India and developers are unable to provide such housing due to the high cost of land involved, especially in metro cities. The government needs to step in and provide land at affordable costs to developers which will help in creating low cost housing stock in the country. Government also needs to introduce policies and regulations that will give a fillip and help create a conducive environment for construction of low cost or affordable housing in India.

What we require is four reforms: 1. Land reform (increase FAR), 2. Tax reform (rationalise taxation), 3. Administrative reform (Single window clearance), 4. Banking and fiscal reforms (over all reform in this sector to create supply), and also special concession for smaller flats at government level.

What is present scenario of the real estate inventory? How do you see the scenario panning out for your company?

The year turned out to be one of the most challenging years for the real estate industry. As it is well known, India's real estate market has been faltering for quite some time as the country's economy remained under stress. Sales in real estate have slipped 15-40 per cent across the country over the last one year. The sector grappled with liquidity issues along with weak sales. Home buyers in India wereexpecting rates to become cheaper by 20 per cent, but due to higher costs including increased cost of approvals, wide fluctuation of the rupee and no stability, home buyers are losing out on purchasing a home. KUL with its existence of more than 45 years in this business has immense reliability factor and its large portfolio offers shelter solutions in Mumbai and Pune. We at KUL plan each of our projects in details, after carrying out a thorough study of homebuyers' preferences.The increased cost is majorly contributed by government.

The markets are trading at their lifetime highs. Your company had plans to raise money from the primary market. How soon are you going to raise these funds?

Though the markets maybe be fairing well, current real estate market sentiments are low and we are hopeful that sentiments will improve post the general elections. We will decide on the next step, only after the elections are done with so that we can get a clearer picture and then decide our next course of action.