Naredco President Praveen Jain is confident about real estate developers regaining the trust of the buyers once the REARA Act is in place. Expecting the change to come within six months, Jain told R&M Editor Palash Roy in an exclusive chat that the regulatory regime will bring in more transparency and that will increase the trust of the buyers. Jain, who is also the CMD of Tulip Infratech, was of the opinion that the sector will see revival only if the Government takes certain initiatives, primary among them being reduction in home loan rates.
The following is the text of the interview:
Palash Roy: Let us start with the sector, right now there is a trust deficit,buyers are not having trust on developers, investors too don’t have trust on developers. How can the buyers be brought back to the market?
Praven Jain: I feel that with the passing of the regulatory Bill, there will be increase in transparency and there will be increase in trust also. I agree that things have not been good in the past and if you see that this has not just happened to one builder, it is because of the economic slowdown which has impacted the whole industry.
PR: But do you think the regulatory Bill will correct the conditions overnight?
PR: Pressure on the builders will increase. Earlier, builders used to take multiple projects at once but now they will take projects in limit. In the past, lot of new developers used to crop up who didn’t have the knowledge of trade but now it will not happen as much. There is pressure to complete projects in time and there is the issue of penalty also.
PR: This is a long process, it will take time, and also state Governments’ need to form regulators in their respective states.
PJ: But in states with the BJP Government, like Haryana and Maharashtra, already committees has been formed. They will probably make a regulator in three months. It will happen in other places too, but a correction will start to come. Change will be seen within six months.
PR: In real estate market, especially in Delhi-NCR, do you expect revival?
PJ: For revival, the Government has to take initiatives. At the time of Mr. Vajpayee, for housing loans, the rate of interest was 7 per cent. There are two-three things, like for example whenever a contractor works for us and if he has any problem, or if he is facing cash-crunch we support him in whatever way we can so that the work goes on smoothly. But if you see today, if we talk about financing, bank is not ready to finance real estate. Housing loan has high rate of interest. If there is a decrement in housing loan, if it comes down to 7 per cent then new buyers will come, there will be growth in GDP; If GDP increases then there will be more employment. There are more than 250 allied industries which are connected to real estate. So as conditions starts to settle the effect will be seen if not immediately but in six months to one year. Only if the Government cuts down the housing loan rate, it will benefit the end user. It will improve the economy immensely.
PR: And what about industry status?
PJ: Priority sector we are demanding for a long time. If the rate of interest is decreased then things will start to improve.
PR: Do you have any self-regulation mechanism In Naredco?
PJ: There is self-regulation, and there is also a complaints cell and a grievance cell. In Haryana we have a cell with the Government. For example in Gurgaon, if there are any complaints, the DC, Police Commissioner, and Municipal Corporation Commissioner, and our representative try to sort it out. This is a board of five-six people which takes decisions before going to court. Grievances are sent to the Board first. We are planning to open grievance cells all over India.
PR: Uptill now how many cases have been redressed?
PJ: Many! We got cases from the Government of India and from the ministry as well. There were some 15-20 cases which we addressed individually, we wrote to developers and the developers resolved those cases.
PR: Let’s talk about Tulip, you have launched a new project, how is the response?
PJ: This new project is about affordable housing. We got a good response. In Gurgaon, there is a fixed rate of affordable housing: Rs 4,000 per square feet wherever the location is. The reason for the positive response is that it has got a very good location. This rate is for carpet area and in the nearby locations super area rate is around Rs.6,500. As you can see, effectively the price is half. So this is why the response was positive. There were around 750 apartments and we got close to 4,000 applications.
PR: And when will this project be finished?
PJ: We started the construction in April this year and there is a three-and-a-half-year time left. We will complete it before the allotted time. We have started work in April. In four months we have completed one Tower. Fifteen floors have been put up. Each month we are putting four slabs. The work is in fast progress.
PR: Besides this, what are the future plans for Tulip?
PJ: We have one commercial project in Sector104 but if the market revives then we will start to work on that. We have another commercial in Sector 89, there are few more in pipeline like affordable housing in Dharuhera which we are planning in two- three months. Land has already been brought, license have been applied. In Sector 104, we have got LoI (Letter of Intent) as well. Our first preference is to start our next affordable housing project in Dharuhera.
PR: There are so many projects in Dharuhera. Do the market has that kind of an apetite to absorb the inflow?
PJ: But we are going with affordable housing segment, where the density is small, house is small, 500 sq ft which costs Rs. 13.50 Lakh for two bedroom, and in Dharuhera there are no affordable housing projects , there are either premium housing, or mid-segment housing projects, nothing less than Rs 35 lakhs. In affordable schemes the size decreases, which in turn reduces the cost. Rs.3600/sq ft is the cost and people are getting a 2BHK at Rs 15-16 Lakhs, for which will be in demand I believe.