Why real estate should be given an ‘Industry’ status?

Real estate is one of the industries which produces the second highest employment and generates an increased growth of GDP of the country.

Real estate is not been declared as an industry. Real estate which is the swiftest growing sector with ever growing concerns has been left back without being given an ‘industry’ status. It is a disappointing fact for the realtors that their sector is not even recognised as an industry.

Since time immemorial, the real estate sector has been witnessing major fluctuations and credit crunches. Although real estate promotes a lot of business from steel to cement and others, it is still argued that the real estate has to be considered as a priority sector making it more accessible to the availability of funds. In order to make the funds easily available the FDI and the ECB norms also should be loosened.

The urge for the real estate sector to gain the industry standard:

One of the major reasons for the real sector’s demand for an industry status is the increased land cost and lack of availability of funds. The construction business is the second largest after agriculture in the country. The real estate sector has been kept away from the financial institution benefits, lower interest rates and easy approval processes by not possessing the industry standard.

Also there is an urgent need to urbanise and build more cities and reduce graft and corruption as they channelize money away from productive investment. Currently the real estate sector is facing many complications like the liquidity issues both at buyers’ as well as developers’ levels, high land cost, delay in approvals, lack of infrastructure and skilled manpower.

There is an increase in the land prices due to its non- availability which apparently increases the overall cost of the projects. Apart from this, the delay in approvals and liquidity crunch has also resulted in the slowdown of the new projects.

The real estate has been progressing on a faster pace with a record in construction and leasing out of spaces in both retail and office along with a growth in the residential sector.

The role of real estate:

As mentioned earlier, the real estate in India contributes about 5 per cent of income out of 14 per cent through the infrastructure sector and the GDP (Gross Domestic Product). Truthfully, it is still awaiting the industry recognition. Although various companies which are involved in the construction of dams, roads and others have gained the industrial status, the real estate in spite of providing employment to many people is still in the queue to get the industry standard. Apart from this, real estate also benefits more than 250 ancillary industries. The real estate sector converts raw materials into finished products in the form of buildings, and housing which is a basic human need.

Currently after the declaration of the budget 2012, there is an increased demand by the developers that the sector has to be granted with an industrial status. Most of the developers believe that the current real estate sector is highly unorganized. In fact, there is an urge that the sector should be given an industry status as it will help not only the people from the same sector but also the plus points of other people directly or indirectly allied to the sector. Apparently it is predicted that giving an industry status to the sector will result in the downfall of the value of residential properties, as the industry status will mean tax benefits and reduced stamp duty for a buyer. This will eventually affect the overall price of the property.

What happens if the real estate sector acquires the industry status?

• The sector will be entitled to obtain funding from the financial institutions.
• The real estate sector will be recognized as a priority sector, especially by the Reserve Bank of India (RBI) and other banks, including many other financial institutions.
• Getting ‘industry’ status will help in easy sanction of loans for projects.
• The real estate’s rates of interest will stabilize once it’s given the identity of an organized sector.
• The real estate sector will have easy approvals from the government with the industry status.
• The real estate sector will change the perception of the State and the Central government after gaining the industry status.