‘Realty project costs surge by up to 20%’

NEW DELHI: Real estate sector has witnessed substantial increase in project costs during the last couple of years as foreign fund flow has almost dried up, while interest rates and input costs have headed northward, said Jones Lang La-Salle in a report.

While rising interest rates have led to costlier bank credit, the strict RBI guidelines have made real estate lending all the more cumbersome, the report pointed out. “Currently, the costs of key inputs for Real Estate Development are up by at least 7%. This is over and above a rise of about 25% last year,” JLL said, adding that labour cost is up 10-15 % and the prices of steel and cement have gone up by about 7%. “The net rise in construction costs is approximately 20%. Therefore, the Indian real estate sector is in dire need of foreign funding, both for maintaining growth and containing costs.”

As the Real Estate Mutual Funds (REMF) remained a non starter, FDI is the only saver which the real estate sector can look up to, JLL said. However, the ever-changing policies on FDI, taxation and development, coupled with lack of transparency and a high amount of friction in approval mechanisms have led to an uncertainty in yields and tenure of lock-in for investments in real estate, the report said, adding that this has proved to be the biggest stumbling block in attracting FDI.

The total FDI in 2012-13 came down to around $1.3 billion as against over $3 billion in 2011-12. In the current year, the situation has further deteriorated. The biggest problem is the uncertainty surrounding the investment period. Shobhit Agarwal, JLL MD (capital market), said, “At present, if a foreign investor is willing to invest for a medium term like 5-6 years, he is bound to be hesitant as it is most likely that the targeted projects would take longer than 5 years in completion. Also, foreign investors are bound to miss out on the cream of returns, which come only after the project reaches advanced stages of development or nears completion

Source http://timesofindia.indiatimes.com/business/india-business/Realty-project-costs-surge-by-up-to-20/articleshow/21640037.cms

Haryana approves ‘affordable housing policy’

CHANDIGARH: For mass availability of dwelling units at affordable rates through grant of licence, the Haryana government todaytoday approved “Affordable Housing Policy 2013″.
The policy will ensure increased supply of ‘Affordable Housing’ in the urban housing market to the deserving beneficiaries, it was informed at a meeting of the State Cabinet, which met here under the chairmanship of Chief Minister Bhupinder Singh Hooda.

Through this policy, the state government envisages to make available close to 1,25,000 affordable dwelling units having carpet area of about 500 sq ft carpet area each in the urban centres of Haryana, which are constructed through the Capital Investment of private sector within a period of next five years, an official spokesman said.

“Once available, this supply alone is likely to serve a lower and lower-middle class population of close to six lakhs in the urban centres of Haryana in the next five years period,” he said.

The size of apartments to be constructed under this policy would be in the range of 28sqm to 60 sqm carpet area.

The maximum allotment rate for the apartment units approved under such projects would be Rs 4,000 per sq ft of carpet area in the Development plans of Gurgaon, Fairdabad, Panchkula and Pinjore-Kalka, Rs 3,600 per sq ft in the development plans of other high and medium potential towns and Rs 3,000 per sq ft in the remaining low potential towns.

As a matter of security against any possible delinquencies in completion of the project, the coloniser would be required to furnish bank guarantee against the total realisation from the project at the rate of 15 per cent for areas falling in the Development Plans of Gurgaon, Faridabad, Panchkula, Panchkula Extension and Pinjore-Kalka and at the rate of 10 per cent for rest of the towns, he said.

Source http://economictimes.indiatimes.com/markets/real-estate/realty-trends/haryana-approves-affordable-housing-policy/articleshow/21656904.cms