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Will the New Year bring cheer?

Harsh realty: Signs such as these were common the whole of last year

From the terror that recently struck Mumbai to the economic crisis plaguing every sector, including real estate, the country hasn’t been spared of anxious moments in 2008.

The global economic crisis following the U.S financial meltdown, which had its germination in the real estate sector, was the single most unforgettable event of the year 2008. The Americans called it a simple ‘sub-prime crisis’ whereas it turned out to be much more than that. The “over-ambition” of bankers was considered the cause for the housing debacle, though the builders and developers who went on large scale unhealthy expansion should be equally held responsible. The central banking system which failed to supervise and control the unbridled growth should be held equally liable.

The most dangerous happening in India was the “quick money” making trend. Everyone wanted to make a fast buck from whatever field was open to them. The anxiety to corner property in order to gain the advantage of rising prices could be seen in every conceivable act — buying of land, building houses and flats/ apartments, developing housing colonies etc.

While the cost of houses went up due to high price of construction materials, landowners including farmers quoted very high prices for their land when builders and developers sought to buy them. The Government too raised the taxes and levies, including service charges on construction, thus milking the ‘kamadhenu’ non-stop. The slump in the equity market propelled investment in property. Even speculative investment among the ‘land sharks’ grew by leaps and bounds.

The reverse mortgage facility provided by banks to senior citizens to pledge their house and obtain loans without making any repayment, to support old age needs, was a landmark in the Indian property market during the year 2008, which has the potential to trigger demand for housing among the middle-aged middle class.

A few controversial developments took place in the Karnataka property scene, especially in the Bangalore market. The ‘Sakrama’ scheme for regularisation of irregular layouts and constructions created great public ire and the Government had to initially postpone and later thought of amending the same in order to make it acceptable to the people.

The regularisation proposal by recovering hefty penalties was considered “anti-people.” The new Government in the State had to finally abolish the scheme and order refund of the fee collected.

The ‘SAS or CAS’ controversy was another unpopular measure. Though the Government has abandoned its plans to bring in CAS, the revised SAS is yet to be put in place. The notification covering the revised SAS appears to have invited a large number of objections and the BBMP is still studying them.

In the infrastructure area, intervention of courts on account of writs and PILs naturally lead to delays in implementation of plans for peripheral roads, metro stations, road widening etc.

The controversy over high toll rates for road use introduced by the NICE is the latest issue that may have adverse implications to infrastructure development in the short run. While levy of toll in itself may not be the issue, the exorbitant rates, beyond the paying ability of ordinary citizens, can be the subject of debate for a long time.

The fundamental issue arising out of such controversies may be whether the private developers of housing or infrastructure can have unbridled freedom to fix user fee for facilities without any relation to paying capacity and social repercussions.

Towards the closing days of the year 2008, one saw the ‘repair’ approach to property sector by the Government and the Reserve Bank with a series of measures to soothe the high interest burden and the increasing cost of housing, especially that of the small segment.

These ‘stimuli’ plans are likely to give a real shot in the arm for the housing sector which can be sustained only by follow-up measures such as subsidies at least to the ‘aam aadmi.’

The coming general elections may also compel the Government to hand out concessions to the weaker and middle classes liberally. The 2009 Union Budget is due in February, and it is likely to contain many sops to most of the prime sectors, including housing. The year 2009 is likely to be a very positive one to the real estate sector.

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