The need for faster approvals in real estate projects to cut down on the high operating costs and the reason why low-cost housing is not possible in India without government support are some of the issues that Pirojsha Godrej, CEO and MD of  Godrej Propertise    BSE 5.30%  discussed in an interview with ET.

Which is the biggest challenge faced by the real estate sector?

The biggest challenge that the real estate sector is currently facing is the slow pace of approvals. What the sector needs is a system that can ensure faster approvals and, in turn, reduce the turnaround time that a real estate project requires to be developed in India.

This will help reduce the interest and other costs associated with the project, and these can ultimately be passed on to customers.

Lalit Kumar Jain, chief of the Confederation of Real Estate Developers Association of India (CREDAI), has said that a rate hike by the RBI would have an adverse impact on the sector. What is your opinion?

A high interest rate impacts the real estate industry in more ways than one. It increases the mortgage burden for the home loan borrowers, which slows down the demand for houses.

At the same time, it raises the outgo for developers in terms of costlier debts. Having said that, we feel that the costlier rate regime would be a temporary measure as the RBI governor would take steps to reduce these probably in the second half of 2014, which would again revive the demand for houses in the country.

With the demand for housing down at the moment, do you anticipate a fall in prices as well?

Though the demand for real estate is low, there are several reasons why the prices will not come down. The cost of acquiring land has gone up substantially over the past few years, along with the cost of raw materials like cement and steel.

Besides, the delayed approvals add to the costs. All these costs have been rising consistently over the years. Hence, the demand for housing may be low at present, but the developers will not be in a position to reduce the costs.

There have been several discussions about the need for low-cost housing in India to help sort the issue. What is your opinion?

We certainly advocate the setting up of low-cost real estate projects to address the issue of housing in the country. We also have affordable housing projects in Kolkata and our township project in Ahmedabad (Rs 3,500 per sq ft). However, the input costs have been consistently going up in the past few years.

If the government expects the developers to set up low-cost housing in the country, it has to take steps to subsidise or incentivise the developers to promote it. At the current rates, such low-cost housing will not be possible in the country.

Do you believe that the rental housing is the need of the hour?

There has been a lot of talk about rental housing. However, as in the case of lowcost housing, rental housing too requires a boost from the government.

What is your advice to the potential property buyers who have been waiting for a long time to make a purchase?

It may appear to be an advice that benefits the developers the most, but the right thing for potential property buyers who have been waiting for the prices to correct is to buy a house now when the prices are stagnant and demand is low.

We anticipate a revival in the demand for property when the new government comes to power and a new growth policy is announced after the elections.

What is your opinion about the lack of transparency in the real estate sector?

The property market in India has traditionally been unorganised and fragmented. There is no central regulatory body and each state has its own set of norms and approval processes. However, in the past few years, we have witnessed statutory and self-regulatory changes.

The entry of corporates and listing of real estate companies has led to an increase in transparency levels. That said, the sector still has a long way to go.

Another issue is the redressal of grievances, with buyers complaining of losing property on approaching an errant builder. Can a real estate regulator change this?

We are hopeful that a real estate regulator will increase accountability in the sector. Home buyers will be more informed and empowered since it will be mandatory for builders to make complete disclosures on the project, such as plans and construction schedule, number of flats to be built, the floor space index (FSI) applicable, and so on.

This authority will also attend and address customer grievances within a specific time frame. I am sure this will help boost customer confidence. It is important that the government also pay attention to simplifying and clarifying the approval regime relating to real estate projects as the current situation is chaotic.

Which are the projects that Godrej Properties is currently developing?

We are currently developing residential, commercial and township projects across 89.7 million sq ft in 12 cities. This year, we have added a new project—0.77 million sq ft of saleable area in our project at Bhandup in Mumbai.

We have presence in cities like Mumbai, NCR, Pune, Ahmedabad and Kolkota. For nine months ended on 31 December 2013, we witnessed a growth of 12% in total income, 41% in EBITDA and 30% growth in net profit even in the midst of tough operating environment.

Source And Courtsey By:- http://economictimes.indiatimes.com/opinion/interviews/realty-prices-stagnant-right-time-to-buy-a-house-pirojsha-godrej-ceo-md-godrej-properties/articleshow/32899744.cms