'On the contrary, govt took good initiatives for realty'

New Delhi: A common grouse of the real estate industry is that the government doesn’t do enough to boost their sector. However, Manish Aggarwal, executive director at Cushman and Wakefield India feels this impression is incorrect.

In an interview to Firstpost, he made a few points about what the government has done for the real estate sector and what more developers could do for the sector.

Aggarwal said that contrary to popular perception, the government in the last couple of years has in fact taken the initiative to bring in more investment in real estate which has given a boost to the construction as well as leasing industry. Here’s what his thoughts on it were:

Government’s initiatives

1) Opening up to 100 percent FDI: Following the initiatives of the government in 2005 to opening up the real estate sector to 100 percent FDI, the sector was given a fillip.

“Around five to six years back when we were going to open FDI in real estate – that brought in a lot of capital and gave a boost to both the residential and the IT sector,” Aggarwal said.

2) Favourable policies:

The government also introduced IT policies where additional floor area ratio (FAR) was given to developers to construct more for IT purposes. The increase gave developers a boost to come up with more and quality supply.

(FAR is the amount of useable floor area permitted in a building (or buildings). This is the ratio of the gross floor area of a building to the total area of the land on which the building or buildings stand.)

3) Special Economic Zones: “The government also introduced special economic zooms (SEZs) – which didn’t take off the way it should have because of flip flops in government policies – however, to a large extent (where developers took an initiative) it has boosted a segment where there is lot of exports,” Aggarwal said.

However, Aggarwal said that the developers too could do more. One thing would be to take advantage of the capital brought in by the government’s initiatives and use it to make more residential properties.

While developers have take advantage of FDI rules to develop commercial spaces – with Mumbai, Delhi, Pune, Hyderabad and Bangalore being its main beneficiaries – Aggarwal said more investment in the residential space was important. As per latest government estimates, India has an urban housing shortage of 18.78 million .

“Most of this capital (FDI), has gone into catering to commercial spaces – mainly the IT sector. Developers can use this capital in the residential space. The residential sector in the last 4-5 years has seen a huge growth – primarily because of consumption of a particular segment of society wherein the residential segments are in short supply. FDI has given a boost to capital and this money is available to developers to use for residential development. Foreign direct investors look at the 18-22 percent kind of coupon rate and while it is capital that is on the expensive side, it allows the developer to take the money and invest it in more such residential projects,” he said.