Anticipating strong policy measures for real estate in forthcoming Budget, embattled realty majors see positive signs of recovery taking place, within next Three months as affordable housing rev up demand and improved cash flows address their liquidity concerns, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
The ASSOCHAM Business Barometer (ABB) Survey on “Flowing Sentiments in the Real Estate Sector” released here today by its President, Mr. Sajjan Jindal says “based on an expert (focus) group of 25 real estate firms, found 88 per cent of respondent CEOs sensing a quick revival in the sectoral activity within next three months as developer’s strategic shift towards affordable housing and a significant price correction in the housing projects has pepped up the sale of residential property”.
As per the Survey (conducted between May 15 – 25, 2009), a whopping 92 per cent of the respondent developers considered affordable housing as the most dominating segment to shore up the demand in real estate sector. The policy actions supplementing the robust demand in the housing sector is likely to hold the key for a speedy recovery phase in the sector.
With developers’ concentrated efforts to target the lower and middle income consumer group during the downturn, 84 per cent of the surveyed CEOs signaled the least impact (in terms of demand contraction) in the affordable housing segment.
According to the Survey, at a time when luxury housing (more than 50 per cent), SEZ (40 – 50 per cent), retail space (30 – 40 per cent) and commercial space (20 – 30 per cent) were witnessing steep contraction in demand, affordable housing was the single most resilient segment with a minimal contraction of zero to ten per cent.
On the policy front, the surveyed CEOs sought single window clearances for all schemes under affordable housing in the line of SEZ clearances to enable fast development of units and achieve the short fall of about 26 million houses at the earliest.
A majority of 76 per cent of the ABB respondents viewed the stimuli given to the sector through fiscal and monetary measures as inadequate to help boost the demand-supply scenario. However, of all the measures taken by the RBI and the commercial banks, 64 per cent of the respondent CEOs were of the view that RBI’s allowance to banks to restructure loans to developers has been the most successful in improving the liquidity for real estate sector.
In the present market scenario, 60 per cent of the surveyed CEOs perceived resurgent stock market as the most prominent source of finance to fund the sector’s cash requirement, followed by 28 per cent viewing bank credit as the best viable option.
Hefty funds raised through QIPs in the stock market (exceeding Rs 8,000 crore) along with debt restructuring would allow the developers to manage their cash flows even more efficiently to address their liquidity concerns.
Almost 92 per cent of the respondent CEOs strongly agreed to the need to unify stamp duty on property across all the Indian States. The surveyed developers also sought reduced stamp duty charges to increase revenue and avoid duty evasion.
Among other policy issues, respondents asked for a central regulation body, recognition of real estate sector as industry, further relaxed norms for ECB and FDI along with a need for speedier and hassle free statutory approvals.
The Survey also found that metropolitan cities has been the worst affected market segment whereas tier II cities have been seen as the most promising one to boost up the sector as commercial activity moving to these cities and their greater yield has given a tremendous impetus to investment in the these market segments.
Among the six metropolitan cities, the financial capital of India, Mumbai, has been ranked first as the most saturated in terms of real estate assets (both commercial and residential) followed by Delhi NCR (second) and Bangalore (third) whereas Chennai, Kolkata and Hyderabad were ranked fourth, fifth and sixth respectively.
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