An Interview with Kumari Shelja, Union Minister of State for Housing and Urban Poverty Alleviation.
With the real estate sector stirred and shaken in the wake of current slowdown, housing ministry has been in the forefront to tackle the crisis. It was instrumental in getting two recent stimulus packages approved to boost housing demand and to give a momentum to realty.
Q. Affordable housing today is the answer to the current real estate crisis. Private developers, however, complain that margins are very low and that the government must offer incentives like cheaper land to promote affordable housing. On the contrary, urban development bodies of the state governments are defeating the purpose by auctioning land at exorbitant rates. What does your ministry propose to do in this regard?
K.S: We had pointed out to the state governments that auctioning does raise the prices to unrealistic levels but I must also point out to the real estate fraternity that they also have to share some responsibility for the escalation of land prices in the last few years. The way the land was bought at such high prices by people from the real estate sector also contributed to price escalation.
We had also told the state governments that more land needs to be released for affordable housing. But it is not just the matter of giving land; there are other policy issues and alternatives. For instance, we can consider a liberal FAR. Also, there are cross-subsidy models which are being worked out in different parts of the country. One can learn from each of these initiatives and state governments do have a significant role to play. We have already sounded them about this.
Think of this. The developers may be granted an increased FAR at one place and they can build affordable homes elsewhere. Or even at the same place they can get some commercial benefits, some special incentives or financial incentives. These are all different alternatives/models which are in place in different parts of the country that can be worked out. But clearly a major thrust needs to be given to affordable housing.
Q. But the problem is that real estate being a state subject, it will take quite some time before all these policy measures are implemented, whereas the demand for affordable housing is instant.
K.S: No, it is not that I spell out the ways here and now and the state governments follow them immediately. But things are happening all over the country. For example, some states have initiated major housing programmes involving the private sector. Also, new technologies are being brought in. But there are hosts of other related issues which the government, private sector and the beneficiaries must handle and solve together. This can be done. There are no dearth of success stories in this respect in the country.
Q. The government has announced fiscal incentives in the form of lower interest rates for home loans up to Rs. 5 lakhs and Rs. 20 lakhs. But the realtors are asking for further reduction in interest rates to generate demand. What’s the view of your ministry?
K.S: We took up the matter with the Finance Ministry, Planning Commission and even the Prime Minister, all at the highest level, following our interactions with the private developers. I think it is because of our efforts that the two stimulus packages were announced recently.But at the macro level, there are so many other things which the government has to take into account.
Q. Real estate experts, however, believe that reduction in home loan rates alone will not push up demand and there’s an urgent need to reduce property rates to restore the confidence of home buyers.
K.S: That is precisely what I have said .The government has done its bit but the private sector has to respond. The developers must try and settle for lower profit margins rather than holding on to the properties as this is not going to yield much result for them. They must cut down on profit margins to hike demand.
Q. One section of the realty sector suggests that the government should buy their housing stocks to bail them out. Comment.
K.S: I am sorry that’s not the way it is. You can’t expect the government to pick up the pieces after the mess created by the real estate people. Nevertheless, now that this difficult situation has come about, there is no point in simply talking about that a wrong has been committed. I think we should be optimistic and there is a way forward. And I am very happy to note that some of the developers have now started focusing on affordable housing and are coming out with various individual schemes for low-cost housing.
Q. The current crisis has once again turned the spotlight on the urgent need to regulate the sector. What is your take on it?
K.S: Such a demand has emanated from various stakeholders, including consumers and the industry itself. Taking this into consideration, our ministry has already decided to put a Model Real Estate Regulator Act in place. This is aimed at overseeing land acquisition and development process, checking unscrupulous elements and ensuring that property prices do not go beyond reasonable levels.
Such an Act would be prepared after consulting all the stakeholders. Anyway, the Housing Ministry will try to bring it about at the earliest for the states to follow.
Q. The Ministry of Urban Development has already been engaged in an exercise to bring about a Regulatory Act.
K.S: There is no contradiction here. What the Urban Development Ministry is proposing is meant for Delhi since it is empowered to operate only in the capital. But what we are doing is a Model Act for the whole country to follow. At the recent Housing Ministers’ conference in New Delhi, the states endorsed such a Regulatory Act. Hence, we’ll be able to bring that out soon so that states may have their own regulator as early as possible.
Q. There is increasing thinking that apart from developers and realtors, government agencies should also be brought under the ambit of a real estate regulator for smooth functioning of the sector.
K.S: You need not have any fears regarding that because we will definitely look at the role of both the government and the private developers. We will see to it that the Model Regulatory Act is not one-sided and all the stakeholders and beneficiaries, including government agencies, are covered under it.
Let me assure that after consultations with all the stakeholders, we’ll come up with a fairly balanced Regulatory Act.
Q. What according to you is the lesson for both the government and the developers from the real estate crisis? And how hopeful are you about the revival of this sector?
K.S: I am very optimistic because in any economy demand is the driving force. And in India, demand exists. The problem is with the supply which actually suffers from shortage. Taking a cue from the experience of the past few years, we should have focused on the supply side. In future, all of us should be working to ensure that there’s no mismatch between demand and supply
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via realtyplus )
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