Expect consolidation in realty

News Posted - 2010-01-29

NEW DELHI: The turbulence in the country’s real estate industry is far from over despite a clear pickup in economic activity, as over supply or residential and commercial units will continue to haunt the sector in the coming 12-18 months, said K P Singh, chairman of DLF, India’s largest realty firm.

Mr Singh said the sector would witness a wave of consolidation with some players likely to suffer from the glut, as happens normally in a business cycle.

The government needs to attach more importance to this sector as it is one of the largest employment generators and is considered a major growth engine, he said while appreciating the steps taken by the government.

“For growth of India, realty is an important sector as it contributes substantially to the GDP and provides a large number of jobs,” he said.

“There is a need for massive reforms in the real estate sector. The archaic law that prevents growth needs to be changed,” Mr Singh said, adding that reforms will prevent the mushrooming of unscrupulous developers. Currently, 60% of development in India is happening in unauthorised projects, he said.

Talking to ET after being conferred Padma Bhushan, Mr Singh thanked the government for recognising his contribution. “I consider it as a tribute to all those who have supported us in the mission of building a new India. This is a recognition for the entire housing and construction industry,” he said.

The Reserve Bank of India (RBI) had relaxed the provisioning norms for the real estate sector last year, allowing banks to restructure real estate loans.

On the issue of the need of a real estate regulator, he said it was not required given the legal structure of the country. Because real estate is a state subject, it would be difficult for a central authority to operate, he added.

Mr Singh said that the government should “think big and create surplus”, instead of looking to manage shortages. Because of the socialist approach, the country has adopted the philosophy of optimising usage for every one, he said.

Source - The Economic Times