“For The Market To Move, Builders Must Reduce Prices”

?The ?impact from the ?slump in residential real estate? prices across major cities in India is being felt. Constructors are holding on to inventory hoping for prices to rise while home owners are unable to sell ?their ?property. Sriram Kalyanaraman, the Managing Director of National Housing Bank, a subsid?iary? of the R?eserve Bank of India, talks ?to Outlook ?about the factors effecting the stagnation and what the government is doing to get the market back on track.

What’s your present outlook for the residential real estate market?

It is extremely important to note that there has been a slowdown only in certain segments of housing, whereas other segments are doing quite well. The slowdown in certain segments is cyclical. The government has launched schemes for low and middle-income housing. With green shoots emerging in the economy, things will get back on track soon enough. The aim for housing for all by 2022, where 4 crore homes are proposed to be built will boost supply and ancillary industries as well.

While investors withdraw investment from housing and builders hold their inventory, what could change the situation?

The problem in the affordable segment is not of demand as such—though that’s something several other countries face at the moment. We are suffering more from a supply constraint in this segment. For the market to move, it is important for builders to reduce prices. The Credit Linked Subsidy Scheme is expected to boost affordable housing.

Real estate is considered a market that converts white money into black. Will the government’s clamp-down on black money change things?

Yes, the government is taking steps to eradicate black money in the market. It is working on easing approvals for construction and bringing in transparency in approvals as well as sales. The government has also introduced subsidised credit of Rs 6 lakh at a subsidised interest rate of 6.5 per cent for economically weaker and lower-income housing—the NHB is the nodal agency for this scheme. We have already executed 130 MoUs with financial institutions and conducted four regional workshops and will conduct more trainings and workshops for financial institutions. We are also developing an online portal for claims processing.

Private equity players have overcome a recent slump and re-entered the real estate business with enthusiasm in 2015—is the owner-driven market turning into an investor driven one?

Normally, private equity players disinvest after completion. I believe that the entry of private equity players will benefit the market to a certain extent.

Big brands such as the Tata’s and Sahara Group have now entered low-cost housing. How will this change the game in the real estate market?

The entry of big brands such as these is proof that there is promise and opportunity in low cost housing. This move will boost market to quite an extent and help with a much-needed surge.

How will the recently relaxed FDI norms for real estate impact this sector?

The recent relaxation of the FDI norms seems extremely promising. Hopefully they will have the effect that the government hopes for them to have in revitalizing the market.

Your last Residex data was published in July. It said that there’s a slump. How sensitive is this index to recent changes in the economy?

We are reworking our methodology and base year [for Residex] to make it much more robust. We are also considering the possibility of a tie-up with some real estate research firms to enhance usage and robustness of Residex and to incorporate market-linked price movements more frequently.

How can the government counter the stagnation in the market?

Central government together with various state governments is taking several steps to ease the approval process i.e. online approvals for bidding plans which would remove the need of multiple approvals, single window clearances, swifter environmental clearance etc. to facilitate builders. I am told that some states are even considering self-certification for some approvals. From the financing side, rates have been lowered by banks and housing finance companies, and a large part of the rate reduction has been passed on. Housing finance companies are able to underwrite even non-regular income customers more and more—all this should boost the sector.

When do you see prices picking up in the sector?

As the economy picks up the real estate prices also would pick up.  As we see the signs of recovery in the economy, the offtake would pick up in all the segments. Prices are city/segment specific and could vary from time to time. In some areas if the prices are artificially priced up they need to come down to realistic levels but in other segments you can expect a pickup.

This web-exclusive interview does not appear in print magazine.