Real estate sector demands industry status

MUMBAI: Faced by challenges such as increased land cost and lack of availability of funds, the real estate sector has once again made a call for industry status.

"Construction business is the second largest employer in the nation after agriculture. It accounts for 10 per cent of GDP. Yet it has not been accorded industry status thus keeping benefits from financial institution sides, lower interest rates and easy approval processes away from us," Hirco Developments chairman and managing director Firdose Vandrevala said at the CII real estate conclave here today.

He further said there is a need to urbanise quicker, build more cities and reduce graft and corruption because they channelise money away from productive investment.

The sector is currently faced with challenegs including high land cost, delay in approvals, liquidity issues both at buyers' as well as developers' levels, lack of infrastructure as well as skilled manpower, Jones Lang LaSalle India chairman and country head Anuj Puri said.

"Land cost constitutes nearly 80 percent of the total project cost. Due to non-availability of land, the prices are increasing, resulting in increase in the overall cost of the projects. Besides, delay in approvals and liquidity crunch has resulted in decline new launches," he said.

Speaking about the challenges in 2012, Puri said, "2011 was a landmark year with record construction and leasing out of spaces in both retail and office space and growth in the residential space.

"Absorption rate was strong and upward swing was in process. With the economic downturn 2012 became a sort of reality check and supply has been going up, but absorption has come down. The scenario is less predictable and there is a great challenge. This challenge however is also an opportunity."

He further said there was a need to increase transparency to improve investor and buyer confidence, work towards easing out of regulatory framework and increasing and developing skilled manpower.