The housing market is a $1.5-trillion per annum industry which is currently little less than the entire GDP of India (currently it is 8 per cent of GDP). According to Lalit Kumar Jain, CMD, Kumar Urban Development and Chairman, CREDAI, globally the housing growth is barometer of the health of the economy. Jain says, “But in India discouraging housing is the theme of banking regulator. Such is the attitude that ministers and senior officials don’t even call the housing industry association for regular consultation on budget or discussing health of economy.”
Will the recent rail freight hike negatively impact the housing sector?
Says Jain, “The recent rail hike announced by the government has shaken up the struggling real estate industry, as this will result in an increase in cost of raw material and developers will not be able to increase property prices as the industry is already going through tough time. The sales have come down, home loans numbers are dropping, cash crunch is delaying the deliveries.”
"The rail freight hike has a macro impact on real estate sector. The materials cost will increase and the procurement of materials like cement, gypsum, steel, etc will become costlier due to the ripple effect on transportation. The overall cost increase can be in the range of 1-1.5 per cent. The material cost increase due to the rail freight hike will definitely impact the builders. Introduction of duty cuts on raw materials can provide some relief on the cost of materials like cement, tiles, steel etc," says Abhay Kumar, CMD, Griha Pravesh Buildteck.
According to Anand Gupta, Spokesperson, Builders' Association of India (BAI), the freight hike will definitely increase the cost of the building materials like cement and steel. He says, “For construction industry this will add the cost of cement and steel by 1-2 per cent. Definitely, the construction cost will increase. However, I don’t think this is a major hike and the hike in rail freight charges is taking up after a long time. The impact of this increase can be minimised if the government is taking some corrective steps to relax the overall approval systems to bring down the operational cost.”
Jain sums up, “Affordable Housing Policy in real estate is the need of the hour for the Indian real estate and the new government has a pivotal task in its hand to uplift the sector.