Unsold housing inventory is surplus for realty sector: Rajeev Talwar & JC Sharma

Rajeev Talwar, chief executive officer and whole-time director, DLF, and JC Sharma, vice-chairman & managing director, Sobha Limited, present the real estate picture of India and their expectation from the Union Budget, during a candid chat with Dimpy Kalra. Edited excerpts: 

Do you think something historic could be announced for the real estate sector?

Talwar: I am sure that finance minister Nirmala Sitharaman will announce several things that will benefit the real estate sector. In fact, all the three areas, namely housing, real estate and construction, are related to the same industry and its growth can help the government in creating job opportunities and give a boost to the GDP. Announcement related to the real estate sector will bring relief to our customers as well as those who invest in homes. 

Name the segment, luxury, thematic real estate and affordable, where the government will have a bend?

Talwar: See, about 90% demand comes from the affordable housing section, maybe it is for 300sq ft or 600sq ft or 1,000sq ft and the remaining 10% comes from other segments. So, if you want to build six crore homes before 2022 then 60 lakh homes should be built in the second category. Thus, it will provide ample work opportunities for everyone. In fact, this is an industry that demands almost everything like cement, steel, sanitaryware, glass and wood substitutes as well as mechanised construction and labour. 

My first demand is that the government should index the works undertaken between 2000-2004 by the government led by late Atal Bihari Vajpayee because it is a proven measure that has benefitted the industry and increased demand across the country. In fact, it helped us, the sector, housing, construction and real estate, in meeting the target of creating 10 lakh jobs/month.  

Our second demand is related to GST. We are anticipating that the GST Council has taken a good decision of bringing affordable housing under the tax net of 1% and remaining housing schemes in the tax net of 5%. Undoubtedly, they are free to keep GST rates as per their wish but should introduce input tax credit because the tax trail is dependent and based on the input tax credit. 

The third thing is that we haven’t given a thought about rental housing. Incentives should be provided to turn the rental housing into a reality under which people should not restrict themselves to just one house but can buy more houses and rent them. 

Suggest ways to solve the problems related to the unsold inventory in North India?

Talwar: I would like to say that the word ‘unsold inventory’ is completely wrong or is opposite to what is happening. We consider them as unsold inventory because, in the last 70 years, we have got used to a thought that there will be a shortage in the country. Actually, we have been thinking small and are dreaming about the ways to manage the shortage. In fact, we have stopped thinking big, but we both, the Prime Minister and I, feel that while thinking and talking about India we will admire it as a big nation and try to create a surplus. 

Thus, what is an unsold inventory for you is surplus for us and few companies have been able to create a surplus. This facilitates the buyer to see their house while buying it. In short, surplus ends uncertainty helps the builder in getting the best price for the project. 

There was a time when loan rates were quite sensitive in which reduction of interest rate by 0.50% or 1% had an impact on both the bank loan as well as the real estate. Is that sensitivity available till date or not?

Sharma: I think the real estate sector, as well as India’s investment and consumption economy, can be sustained by bringing down the interest rates reasonably. A lobby is working in our country that is offering extra protection to the savers (those who save money) and not allowing them to take risks. They want their money to remain in the provident fund (PF), insurance and banks. This is something that is hurting the equity market as well as trade and industry. There is an absence of competitiveness at the macro level and the individual level. 

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