Every Indian was vexed by the idea that millions of migrants, which included kids, had to walk miles and miles before they reached their destination during the COVID-19-induced lockdown. While many stated the reason for this move was dominated by the fear of starvation, Niranjan Hiranandani, National President, NAREDCO and National President, Assocham has a different take. Hiranandani believes while hunger is one reason, the other reason is the lack of adequate shelter. He hopes that he is able to do his bit in helping provide homes to these less-privileged people in cities, Hiranandani said this at a webinar organised by FPJ-IIM Indore, supported by Big FM and Monelylife.
In this webinar, moderated by Free Press Journal’s RN Bhaskar and IIM Indore’s Himanshu Rai, other than highlighting the migrant issue, Hiranandani spoke about issues worrying the real estate sector. He was speaking at the second last session in the ‘India After COVID-19’ series of discussions.
Given below are edited excerpts.
Position of Real Estate
Real estate has been going through a traumatic experience in the last two years. Realty saw the first shakeup at the time of Demonetisation, followed by the introduction of Goods and Service Tax (GST) and Real Estate (Regulation and Development) Act (RERA) -- all this hit the industry badly. While RERA was a good law, the industry took time to cope with it. This was followed by Insolvency and Bankruptcy Code (IBC) that again shook up the industry.
The IL&FS debacle compounded the impact. This is because 50 per cent of the credit that the industry raises is financed by NBFCs. With IL&FS collapsing, funding to the real estate sector was a hit.
In January 2020, the industry got a glimpse of recovery. The industry was beginning to think that happier times are back, but then COVID-19 struck the industry real bad. The COVID-19 impact was felt across the industry, but in the case of the real estate sector, what compounded the impact was the movement of migrant labour. Real estate and construction sites employ 15 per cent of the labour of the country and together contribute to 7 per cent of the GDP.
Between the devil and the deep blue sea
In the NCR region, there are more than 3.50 lakh building blocks under construction which were sold about ten years ago but have not been delivered. One of the companies that is responsible is Unitech -- which is one of the largest listed companies in India. Unfortunately, the government of India as per the order of the court had to take over Unitech. The Supreme Court has appointed me as one of the members of the board for the company. So, I am given the responsibility to turnaround the problem of the company and get delivery of almost 16,000 apartments which have not been delivered. This is just one company but there are many such companies.
There have been multiple problems the real estate business has witnessed and we have to find ways to resolve them. Over the years, real estate has become the most heavily taxed industry in India -- more taxed than tobacco. About 35-40 per cent of the value of an apartment consists of direct and indirect taxes, so it is natural that properties will become expensive. At the local, state and central levels, the taxation structure should be resolved.
Another issue plaguing the industry is the issue of liquidity. Here the Reserve Bank of India (RBI) can intervene. It is very unfortunate that the industry has to avail of credit with much difficulty. We will be meeting Finance Minister Nirmala Sitharaman to find ways that will help the industry recover in the best possible manner.
Bring change for good
At the Reserve Bank of India level, the intervention around credit policy would be a relief to the real estate industry which is also floundering. Other than a credit policy intervention, we have requested for one-time rollover of debts, like the exercise announced during the 2008 Lehman crisis.
While RERA is a good law, there is a section in the act which is causing liquidity issues for a developer. As per the act, a developer cannot use funds raised from one project to invest in another project. In the COVID-19 times, RERA will have to permit some flexibility in order to balance some imbalanced equations in business.
To revive projects that are stuck in the country, there is a need for last-mile funding. SWAMIH Investment Fund, which is set-up by the Finance Minister Nirmala Sitharaman, is managed by the State Bank of India and is worth Rs 25,000 crore. Of this, Rs 10,000 crore is contributed by the union government and the rest is contributed by various funds. Unfortunately, due to COVID-19, the limit of this fund should ideally be Rs 1.50 lakh crore. Many financial institutions are ready to put up such funds. Now, we are seeking the finance minister’s approval to set up such funding.
Post COVID-19, the rent policy will bring about a revolutionary change in the industry. The draft of the rent policy is already put up on the website of the housing ministry. At present, due to the COVID-19 crisis, work around this policy has slowed down. However, the housing minister, Hardeep Puri, has been taking proactive steps to make this draft policy a reality. The aim of this policy is to provide premises at affordable rents.
At present, it does not make sense for developers to actually build residential houses on rent. However, there are many commercial places that are built and then be rented out across the country especially in major cities. With the arrival of the new rent policy, the developers will see the value in building homes, which will lead many developers to look at building residential houses which can then be given out on rent.
Due to this policy, more homes will be available for rent, which will make renting homes affordable to the general public. This will also resolve the housing needs of migrants and other labourers.
Focus on real estate and witness growth
If the government is able to push the housing-for-migrants story further, it will support the Indian economy. An impetus to real estate combined with infrastructure projects -- envisaged by Union Minister, Nitin Gadkari -- will be major drivers of economic growth.
It is possible to achieve a GDP growth of 7 per cent plus if the government focuses on housing in terms of policies, and liquidity issues around the real estate sector and thus gets infrastructure projects moving. The real estate and construction sector can, directly and indirectly, affect 269 industries.
The countries that have had a GDP growth of 10 per cent were able to achieve that by focusing on road development, real estate and infrastructure.
A safe dwelling place for all
Home is where the heart is. The size and shape of these houses might change, but it is the place you feel safe. The labourers did not feel safe in a city where they lived for more than 10-20 years and decided to head back to their villages. This is because they do not have a home they can call their own. This is mainly because the place they took shelter in, is not home. If you turn all the slums of Mumbai into ownership places, there will be a sense of pride even if it is a small dwelling.
While many migrants were walking for days to reach their homes from cities, I hope this does not happen every again in the country. We will have to make sure that it is not repeated, maybe in the form of an amendment in our constitution or having a system in place that it is not repeated.
I belong to an industry that has not been able to do justice to the people of India. I do hope in the rest of my life, I am able to make up for the loss of time for not being able to do justice to them for so long.
The policymakers are working towards providing shelter to these migrants but the process is too slow. We cannot pride ourselves on having the largest slum in Asia; it is not a good feeling. I would rather say it was the largest redevelopment in the entire world.