Realty prices in suburbs will stabilise by early January

Sunil Mantri, chairman and managing director of Sunil Mantri Realty Ltd, diversified from the family’s textile business in 1986 to get a toehold in the real estate industry. Beginning with small projects in Karad and Pune, his company now has projects in 14 cities with an overall land bank of 50 million square feet.

DNA caught up with Mantri in his capacity as the president of Maharashtra Chamber of Housing Industry (MCHI) to find out what major changes can be expected in the realty sector in 2011.

As MCHI president and a realty major, what is your outlook for the real estate industry in 2011?
We foresee a tough first few months and expect a little pressure on high-end projects. But considering that the Indian economy has registered one of the fastest growth rates, along with the government’s thrust on infrastructure development, the real estate sector will be stable in 2011. As per various reports, the annual housing requirement in the Greater Mumbai region during 1991-96 was 85,000 units. By 2021, an annual deficit of 59,000 per annum is forecast. All of these prompt immediate thinking and planning if the region is to achieve its goal to become a global megapolis.

Most middle class finds buying homes an increasingly difficult option. Do you foresee further price correction? Do you think homes will become affordable in 2011?
Real estate prices depend on various factors, the most important of which are land prices, which have soared at a phenomenal rate in the recent past due to lack of availability of developable land. Besides, there has been a considerable increase in prices of raw material, forcing developers to pass on the burden to the buyers. However, many developers are building affordable shelters in the Mumbai Metropolitan Region (MMR). The MCHI itself had signed a memorandum of understanding with the state government to create a huge stock of 5 lakh houses over the next five years. As far as correction is concerned, the prices have already witnessed a small drop. I don’t see any reason for further decline, unless there is a sharp dip in the cost of land or raw material.

Real estate prices in suburbs have begun climbing higher following the high court judgment setting aside the state government’s order to increase floor space index (FSI) in the suburbs to 1.33 from 1. Does this mean that only the rich will now be able to afford homes even in suburbs?
Real estate prices have witnessed a spurt in the recent past due to acute shortage of sand, and its prices touching the sky. We don’t think there is any co-relation between the increase in FSI and price rise, since the increase in FSI is expected to create more housing supply in the far suburbs and bring some amount of stability in rates. This was a long pending demand of developers in various parts of the MMR and is logically correct as the city, being surrounded by the sea and creeks, does suffer from an acute paucity of land. I expect the government to clarify its stand on 0.33 FSI through a government resolution (GR) in early January. This will help stabilise prices.

Give us a sense of the magnitude of impact on the realty sector due to the sand crisis. Is this delaying projects, pushing costs up?
The impact of sand prices and the shortage of this commodity is not only upsetting the realty sector, but also the economy. It is clear that no new projects will come up if the situation persists for some more time. It will contribute to the rising real estate prices due to increase in cost. If construction work grinds to a halt, the impact would be felt on the country’s economy, since 90 lakh workers are employed at various construction sites across the state, out of which 27 lakh are in Mumbai alone. It will also affect allied industries such as cement, steel, sanitary ware, tiles and marble.

Is it possible to be eco-friendly and yet ensure there is enough sand for ongoing projects?
If an eco-friendly methodology is worked out for uniform dredging of sand and the separation of silt from sand and its management, the dams can be a viable alternate source of fine aggregate for the time being. Dams silting up is a constant process and can be considered as one of the sources of natural sand. However, alternate and adequate artificial or manufactured sand facilities have to be provided for a long term solution as sand is a limited resource.

As more re-development projects come up, builders are luring residents with false promises. Is the MCHI working on a code for developers?
We have code of conduct at MCHI. If any consumer is affected, we can intervene in the matter through our consumer redressal cell.