Real Estate sector needs liberation, not regulation: CII

Would you believe that the simplest way of reducing real estate prices may be to just do away with regulations altogether? Seriously, regulation constitutes a significant percentage - about 23% of the total project cost - in the real estate sector according to a study cited by K Srinivas, Managing Director, Gujarat Urban Development Co. Ltd., recently at CII 'Realty 2007', the Real Estate Conference organized by Confederation of Indian Industry.

In a similar vein, Anuj Puri, Conference Chairman - CII 'Realty 2007' & Chairman and Country Head, Jones Lang LaSalle Meghraj, explained that land constitutes more than 50% of the project cost. "Reduce it to 25% and you will see a drop in sale prices," he declared. Now since the primary reason for high land prices in cities like Mumbai is again, regulation (that too at multiple levels), it seems quite obvious that the cost increases as a result of 'over-regulating' the sector are proving to be just too high.

What also became clear is that regulation is impacting real estate prices directly and indirectly in more ways than one. Restricting supply and fund flows are two areas that were also highlighted at the Conference.

For instance, among the recommendations by Mr. Srinivas was extending infrastructure to peripheral areas where land is affordable. These areas, he pointed out, could then be urbanised and used to provide affordable urban housing.

Echoing his sentiments, Dharmesh Jain, Chairman & Managing Director, Nirmal Group of Companies emphasized that there is a need to first liberate and then regulate real estate. "Give us the freedom to go out of city centres, put up infrastructure and do volumes. Mumbai is not just Nariman Point, 99% of the demand is for the suburbs but regulations are holding us back," he said.

Niranjan Hiranandani, Managing Director, Hiranandani Group of Companies, pointed out that liberalization has reduced prices, opened up supply and increased penetration in sectors like telecom. There is a need for doing the same where real estate is concerned. Deregulate this sector, don't go on adding new regulations, they are simply delaying the process and pushing up prices, he stressed.

So the bottom line where real estate prices are concerned is urgent steps to deregulate the sector. While single window clearance remains a mirage that will probably never become a reality, at least repealing the Urban Land Ceiling Act would be a step in the right direction.

In the meanwhile, get set for yet another increase in real estate prices soon. After all, the announcement of Maharashtra's much-awaited housing policy (with many new regulations) is just around the corner!

Source: http://www.ciionline.org/news_new/newsMain23-07-2007_3.asp