FPJ has learnt that a high level delegation of real estate industry bigwigs met Finance Minister Nirmala Sitharaman in connection with budget preps. Ms Sitharaman is reported to have categorically told them that since the real estate business was booming and doing well in Mumbai, the question of giving them any concessions did not arise.
In an exclusive to FPJ, CREDAI national president and chairman of the Rustomjee Group, Boman Irani tells us about the industry's budget expectations.
Q: FPJ has learnt that the Finance Minister is not keen on giving any SOPs to the real estate industry in this budget. Your views...
A: Its nice to be mentioned in every budget and be recognised as a contributor to the larger GDP of the country. We are about 8 per cent directly affecting the GDP and if you add everything else that we do, steel, cement, services, etc we are close to about 45 to 47 per cent of the GDP.
Yes, the FM is right in saying that we are doing extremely well as an industry right now but we still have a huge delta of growth that we can have and the faster this growth takes place the better for the nation at large. The industry has direct impact on the exchequer with the premiums and GST that we pay. Why not encourage and grow an industry which is at the bedrock of possible growth? Because the supply to demand ratio as per the government numbers is seven crore home shortfall in the country and this is not a static number. On the other hand, the number of home units that are coming out per year are just a few lacs! Why not create the the ability to grow this market and allow all to benefit from this?
Q: What would the industry like the FM to do?
A: I would like them to redefine Affordable housing and put an area tag on it and not a price tag. This price tag of Rs 45 lacs and 60 sq mts-90 sq mts apartments for GST purposes is about six years old. If you take normal inflationary trends then we are talking about Rs 70 to 75 lakhs. I believe cities have their own price points and people who want to live in urban conglomerations usually are in a better position to pay the price because their salaries are better than those living in Tier II or Tier III cities. Price control is affecting my consumer’s ability to buy because if I get a 4 per cent arbitrage on GST that’s a huge value going to the consumer.
Next is the Credit Link Subsidy scheme which the FM can again provide as a bolster to development in the industry and thereby provide homes for those who come from the unorganised sector. Lastly, one benefit that was taken away was capital gains. Why not for the next 2 years give a capital gains exemption for all properties bought in this time or reduce it down to the value of stocks and shares. You want to see the bourses grow and you want to see people invest. Why not invest in real estate?
Q: Emerging Trends in Mumbai…
A: Fortunately with the way infrastructure is coming up… South Mumbai being connected with Kandivali by sea link…imagine how much development will take place on both sides. Similarly there is a whole slew of new types of development that are being sought after. For instance senior care homes…The trend shows today that people who are hitting 55 are visiting these homes by themselves for their own usage in advanced years to come. So this new asset class is going to phenomenally take off in the city and there will be a growing demand for senior care homes. Next student and Bachelor accommodation has become a big thing. All the deals that are taking place; the start ups that are becoming big brands now and coming into Mumbai. Their demand for homes is growing. Warehousing and data centres are huge growth areas. Changes in DC Rules and DCPR are also needed. We at Rustomjee will soon be making forays into these areas in the next financial year.
Q: Price appreciation and new growth areas in Mumbai…
A: I don’t know about price appreciation. I can tell you about velocity. In the Western Suburbs, Andheri has always been at the heart of growth like a growth engine. Bandra too has always continued to be the slightly premium growth area thanks to the coastline, BKC, sea link and now another arm of the coastal road coming there! Next Borivali, Kandivali and Malad will grow for the next 15 years…you can keep doing development here…there is a very strong and prosperous buyer base! City itself will open up big time! Thanks to new infra structure it will become a huge hub of activity. Thane is another area that has grown beautifully like a second city for Mumbai. I also see Navi Mumbai, Dombivali and Kalyan doing well.