As Real estate market is facing downturn due to high property prices and increasing interest rates. So due to this crisis affordable housing remains dream for Aam Aadmi. In an exclusive interview with Mr. Lakshman Bhagtani is Joint-Treasurer of Maharashtra Chamber of Housing Industry (MCHI) shares his views on real estate crisis.
By Nawaz Sayyed
Q1. According to the realty experts there are less chances of reducing property prices, what do you say?
A1. There are no chances of getting property rates reduced due to the following reasons:
More than 65% of the existing buildings in the island city and suburbs are under redevelopment.
The unfortunate part in the case of redevelopment is that after the agreements are signed, about 10% of the members/tenants back out in spite of having signed the resolution unanimously of the society in respect of redevelopment.
Now these 10% flats are occupied by them on different floors as such the existing building cannot be demolished in spite of 90 percent members of society and/or tenants having signed the resolution, having signed the agreement with the developer. The plans having been approved, due to such reasons the supply of the land in the market becomes scarcity, therefore I see no changes of reduction in the property prices.
Q2. As per the reports property rates are high and home loan rates too, so it means affordable housing remains a dream for Aam Aadmi in Metros particularly in Mumbai, isn’t it?
A2. It is due to scarcity of land and the scarcity is due to the owners of the property often changes the price looking to the appreciation of the property. The tenants suddenly back out and ask for larger accommodation, free of cost in the vicinity as such the cost of land in the hands of developers is too high. Due to such speedy escalation in the rates of land and the flats which are final product of the land the Aam Aadmi does not think of the affordable housing. It is no more a secret that graduates are staying in slum on rent. The Developers are struggling to get the approvals for affordable housing presuming the developer has land then to there are great amount of hassles, which could be resolved only by the Competent Authority.
Q3. Will real estate market go down as new norms are introduced by state government such as, it essential to produce a building sanction plan and structural safety certificate as a prerequisite to any form of registry? Average of registration of property 100 per day but now 7 to 8 registrations only per day.
A3. With regard to the lesser registration per day, reasons are (i) there are lesser properties available with approvals, (ii) the stamp duty ready reckoner gets revised every year, unfortunately. (iii) The Customer co-relate his purchase timing with the share market, presuming when the share market will go down the rates of real estate will also come down, but he over looks that the share market being speculative, it jumps heavily and suddenly due to the purchase by local and international financial institutions, (iv) The Customer co-relates his buying expecting that the rate of interest of financial institution shall one day come down, which has been a dream, (v) The Customer looks at the eye-catching news that the prices will crash as such is stamp duty, which is 5% shall also come down,
Q4. Will slowdown in International real estate market affect to Indian Real Estate Market?
A4. There is different logic to the demand and supply of respective country. For instance, Dubai has over residential supply but the visa rules are stringent as such hardly anybody is able to settle there forever. For instance USA due to the subprime lending i.e. security of the premises was sold by one institution to another institution and bankruptcy declared by top most financial institution. The mega metro city like Mumbai is facing genuine problem of infrastructure. I shall give you simple example, I have sold building near Worli Sea Face at the rate of Rs.125 per sq. Ft. (carpet area) in the year 1973-74 and the rate today in that building is commanded as high as Rs.45000/- per sq. Ft (built up area).