Government policies on real estate sector to add on to rise in property prices by 20-25%: NAREDCO

“The ‘Land Acquisition Bill’ passed by the parliament followed by 25 basis point hike in Repo Rate by Reserve Bank of India will lead to 20-25 per cent increase in the property prices,” says Sunil Mantri, Vice President of National Real Estate Development Council (NAREDCO).
The land acquisition bill passed by the parliament, proposes that farmers and landowners be paid up to four times the market value for land acquired in rural areas, and two times the market value in urban areas. Reacting on the bill Mr Mantri said, “It is not a good development for the real estate industry, as this policy is going to increase the land cost significantly, impacting project costs and thus leading to rise in housing prices. If we see today the land valuations are already high, and land acquisition bill would further increase the valuation, making land acquisition difficult. Also the rise in interest rates will increase the cost of capital for the developer and for the buyer, making it a double burden on the end user as the developer also has to pass on the cost to the end user.”
Mr Mantri further said, “It would impact several sectors and by bringing private negotiations for land under the government ambit, it would lead to several hurdles to buy land and increase procedural delays. Thus the affordable housing’ projects would not be affordable anymore.”
Adding further Navin Raheja, President, Naredco said, “The steps taken in the monetary policy in current business scenario will further add problems to all sectors related to real estate business. All industries including real estate are struggling and facing huge liquidity crunch, high input costs and slow sales. Higher repo rates will again lead to increase in borrowing cost and will result into further rise in input cost. We were expecting that the RBI will not change the repo rate and will take measures to increase the liquidity in the market by reducing CRR and other necessary measures. But no such step has been taken.”
Commenting  on Land Acquisition Bill, Mr Mantri pointed out,  “The new land acquisition bill is expected to adversely affect the development of large real estate projects, infrastructural projects and industrial developments. The cost of land will go up and the time taken for acquiring such land will also get prolonged as rehabilitation and resettlement (R and R) policy will be applicable in case of land acquisition of 50 acres in urban areas and 100 acres in rural areas. The private developer who is buying a land through direct negotiations from farmers will also go through the entire land acquisition process.”
He further commented that “In most parts of the country, the private developers acquire land at mutually negotiated market price with 100 percent consent of the land owners. Additional financial  burden of R and R component will increase the cost of land. In our opinion the bill should exclude the privately, mutually negotiated transaction from preview of the bill as R and R provisions on larger land acquisitions will adversely affect the real estate development in the country.”

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