The real estate industry in the State has already been corrected by itself leaving hardly anything to speculate further, says S.N. Raghuchandran Nair , managing director of SI Properties, national vice-president, CREDAI, and president, Trivandrum Chamber of Commerce and Industry, as he speaks to M.L. Mahesh . Excerpts from the interview
On the present real estate climate of the State
No notable positive changes are visible as of now and the State still passes through a dull patch.
Nonetheless, location-specific sales are happening leaving other projects at abeyance, which are mainly deterred by poor accessibility.
One reason for the lull response could be the surplus supply over the demand.
The affluent who are not affected by the recessionary trends are speculative and adopt a wait-and-watch policy.
Volatility of oil prices and resulted economic slump in the Gulf demand NRIs to park their funds in more liquid options like bank deposits.
Real estate is no longer perceived as a liquid option and hence fresh investments drop.
But we look for the genuine buyers to whom I would advise not to speculate any further, as corrections have already been made and this is the right time for new investments.
Lots of projects across the State have now been stopped at various stages of their construction.
Haven’t they done any market study before making into the construction foray?
Whenever an industry is found successful, lots of enthusiasts may join the bandwagon to make some quick money.
The late 70s and 80s have seen lot venturing into travel agency business and now you see how many exist.
Similarly, real estate industry started sprouting in Kerala in 1984.
As the sector started growing, every person who owns a bit of land became a builder, those who were into some other business came in for their pie, and there was no regulation.
No regulations and controls resulted in havoc with lots of builders who did things the way they liked and this eventually started killing the market. Even those builders who were genuine were tagged as bad.
But now with the introduction of RERA, which is expected to cleanse the sector and create buyer confidence, only serious players will remain.
On Real Estate (Regulation & Development) Central and State Acts.
Whenever an act is brought in, it should be prospective and not be retrospective. The Central Act, which shall prevail over the State Act, is retrospective and covers all on-going projects in its ambit. How can a project nearing its completion be registered?
It is not practical. I might have diverted money into other properties and investments.
How can I bring the money back?
A builder has to approach a series of government agencies to get electricity, water, No Objection Certificates from pollution, fire department, archaeology, traffic and others.
Most of the project delays are caused by government apathy.
For example, getting the electricity connection takes its own routine time.
If the transformer’s capacity is insufficient what will the builder do? It negates the spirit of the Act.
So the Act should bring in all stake holders, namely the purchaser, builder and various government agencies in its fold.
The Act says if the builder does not comply with various provisions of the Act, he will be put behind the bars.
The government’s intention should not be taking the builder behind the bars but it should be to safeguard the buyers’ interests.
If the builder completes the prison term and comes out how does the buyer get compensated? If the builder wilfully goes to prison, how the buyer’s interest is safeguarded?
On the State budget
Government should consider lesser stamp duty of say 2 to 3 per cent on the market value of land instead of unrealistically hiking duty on a fair value, which was fixed a long time ago. Unfortunately, the State budget doesn’t consider the National Housing Policy of ‘Housing for all by 2022.’
As the Centre doesn’t impose Service Tax, the State government too may discard the VAT.
Another proposal of seeking the certificate from a Central Public Works Department -approved engineer to fix fair value of apartments would result in another opportunity for corruption.
One may tempt to bribe the official to fix his property at a lower rate to evade tax.
Government may not frame new policies to aid corruption. Government may mull fixing a fair value for apartments instead.
Above all, no builder is going to get affected by the increase in taxes and duties.
Whatever taxes the government imposes are ultimately paid by the common man.
And finally, State budgets are presented as a routine affair without an element of ownership.
Rather, every State budget should be a progress report that goes on to compare last year’s target and actual achievements of the government. But this never happens.
State budgets, which are usually a jugglery of figures, should be made totally comprehensible to the common man.
Strict efforts are to be made to strengthen peoples’ trust.
Actually, the tax regime has to be renamed as ‘Mismanagement Tax,’ the cost we pay for running the machinery.
But in general, the recent State budget has been drafted quite well and shows the promise that it is in the right direction.