Time to get the real estate ‘aadhaar’ right

The impact of demonetisation has not hit the city’s real estate sector, claims the head of the Confederation of Real Estate Developers’ Associations of India (CREDAI) Chennai.

Suresh Krishn, the newly-elected President of CREDAI Chennai, says unlike in other locations such as Ahmedabad, Delhi or Mumbai, where the real estate business has been “badly” hit due to the note ban, the southern metro had not suffered. “That is because this is an end-user market and not an investor market,” he said. 

In the locations mentioned above, typically developers offload their new stock through brokers especially when it comes to large projects, whereas in Chennai, it is the user who approaches the developer and finalises the deal, he pointed out. 

Noting that demonetisation would help the real estate sector, Suresh said apartments in the less than Rs 1 crore category, constituted 95 per cent buyers while only the balance belonged to the luxury segment. “Buyers avail of housing loan maximum in the under Rs 1 crore category, where the cash component does not exist,” he sought to point out. 

Recently, he was part of a meeting in Mumbai where the discussion revolved around the note ban impact. But steps such as opening accounts for lower income groups have been taken. “We were finding it difficult to pay salaries to the labour class. That led us to enter a tie-up with the State Bank of India, recently,” he said, outlining the manner in which this initiative would help the sector. In fact, the choice of SBI was made as the transaction cost of private banks is high and the latter’s preferred customer profile is not focused on the “mass.” 

Three weeks ago, CREDAI opened over 1,000 accounts with the country’s largest public sector bank as part of its “inclusive” campaign. “SBI is proactive and they approached us with this separate inclusive initiative. An exclusive AGM has been assigned for the financial inclusion drive. Weekly visits by banking correspondents with PoS or point of sale terminals have benefited the people as well as the sector immensely,” Suresh said. 

As part of the KYC or ‘Know Your Customer’ formalities, all the details were being complied with. But, there were cases of migrant labour being asked to go back to their state when it comes to complying with the Aadhaar card norms. 

Sharing his views on the real estate sector’s performance and potential, Suresh said in the last two years’ developers had not raised prices. “The market has been slow and there are at least 10,000 apartments under various stages of construction and yet to be sold,” he said, adding the vacancy levels were coming down though new project launches were not yet happening. 

Given that the existing inventory levels was coming down, this is the best time to buy, Suresh opined, adding the buyers could end up with a good bargain. “We are only an assembler of various costs, be it land or construction. Our margins are not high and land prices are exorbitant in the city,” he said, adding that the time taken for getting approvals is what was driving the cost of homes. 

“Last one year, the market has not done well and there has been no price rise too. The track record of earning is important for financial institutions and so, we expect lending to again pick up that will trigger the buyers’ sentiment,” the head of the apex body said, adding the association had been engaged in discussions with the government to put in place single window clearance for housing projects. 

“Since the new team took over in April, we have been pushing for this as right now, there are close to 55 NOCs or no objection certificates needed to start a project. If we can speed up the process to obtain clearances within three months, then time is saved and faster sanction will ultimately benefit customers,” Suresh said, adding that the interactions at the top-level in the government were not much during the May to June period last year. 

Jobs were moving to neighbouring states from Tamil Nadu and unless the government steps in to check this, developers too would be forced to re-jig their strategies. “Where there is a race, we will move,” he said, pointing to the phenomenal growth of IT sector in Karnataka that has led to a thriving real estate there.