Housing price cut not possible sans interest reduction
New Delhi: Realtor's body CREDAI on Wednesday said it is unrealistic on the part of the government to expect developers to cut housing prices and demanded that steps should be taken to boost supply of affordable homes.
"Instead of asking realtors to download unsold stock at discounted prices, Finance Minister P Chidambaram should take immediate steps to boost to housing stock supply through special incentives to the affordable segment," CREDAI said in a statement.
"...Developers are unable to cut prices because of very high cost of construction," it added.
CREDAI was commenting on reports suggesting that finance minister has asked commercial banks to encourage developers to clear inventory and lower the prices, the statement said.
"CREDAI, therefore, appeals to the Finance Minister to look at the ways to bring down the cost of construction while taking steps to encourage people to have houses of their own," its President Lalit Jain said.
"As things stand, it is unrealistic to expect developers to cut down prices, even of some unsold stock as they had already incurred the high cost," he said, adding that the reported figure of unsold housing stock of 5,00,000 across the country is unrealistic.
However, Jain said: "We are happy that at last the government has realised that real estate kick-starts the economic development".
CREDAI said the government should focus on bridging the demand-supply gap by lowering the rates of interest and suggested that home loans be given at 7 percent for the low income groups and economically weaker sections.
"It is estimated that out of the huge investment in the organised real estate industry funding by the commercial banks is negligible. Banks and finance companies are still wary of financing real estate sector as RBI always keeps it in the negative list," the statement said.
CREDAI has requested the Indian Bankers Association (IBA) to involve the developer community in the banks' advisory committee on housing, mooted by the finance minister.