Government policies on Real Estate sector to add on to rise in property prices by 20-25% - Says NAREDCO

Mumbai  Sep 23rd 2013(Sailesh Gandhi): The recent changes in the government policies is expected to hit hard the common man who wish to have a shelter on his head. ‘’ The 'Land Acquisition bill' passed by the parliament followed by 25 basis point hike in Repo Rate by Reserve Bank of India will lead to 20-25% increase in the property prices, says Mr Sunil Mantri, Vice President of National Real Estate Development Council (NAREDCO).

The deepening economic slowdown, rising cost of living and low wage revisions, coupled with higher interest rates, have forced thecommon man to rethink on his decision of owning his dream home. The recent announcement by RBI on increasing Repo rate by 25basis point has taken its toll on salaried professionals who are finding it difficult to apply for home loans in the tight market scenario.  This coupled with the'Land Acquisition bill' passed by theparliament will ensure property prices increase by 20-25% in the coming years Mr Mantri added.

The land acquisition bill passed by theparliament, proposes that farmers and landowners be paid up to four times the market value for land acquired in rural areas, and two times the market value in urban areas. Reacting on the bill Mr Mantri said "It is not a good development for the real estate industry, as this policy is going to increase the land cost significantly, impacting project costs and thus leading to rise in housing prices. “ If we see today the land valuations are already high, and land acquisition bill would further increase thevaluation, making land acquisition difficult. Also therise in interest rates will increase thecost of capital for the developer and for the buyer, making it a double burden on the end user as the developer also has to pass on the cost to theend user,” he pointed out.

Mr Mantri further said  "It would impact several sectors and by bringing private negotiations for land under the government ambit, it would lead to several hurdles to buy land and increase procedural delays. Thus theaffordable housing' projects would not be affordable anymore."

Adding further Mr. Navin Raheja, President, Naredco said " “The steps taken in the monetary policy in current business scenario will further add problems to all sectors related to real estate business. All industries including real estate are struggling and facing huge liquidity crunch, high input costs and slow sales. Higher repo rates will again lead to increase in borrowing cost and will result into further rise in input cost. We were expecting that theRBI will not change the repo rate and will take measures to increase theliquidity in the market by reducing CRR and other necessary measures. But no such step has been taken”.