19 October 2007
Prominent Growth In Indian Housing Market
According to the study conducted by HUDCO-IIM Ahmedabad every rupee invested in the real estate sector adds 78 paisa to the state's GDP. The sector will grow from $12 billion in 2005 to $90 billion in 2015. And majority of the growth is expected to come from the housing market. Although the average age for ownership is 32 years now as compared to 45 years in the 1980s, yet India's realty sector is dominated by the unorganized sector. Very few corporates and large players have a national presence. Growing middle class salaries and easy access to finance have given a rise to the industry but at the same time restrictive legislations and non-transparent transactions have nullified some of these gains. Same laws are applicable, those that were prevailing in the 19th century. And these laws have become barriers: a McKinsey study calculates that removing land market barriers can contribute an additional one percent to India's GDP growth rate. According to a World Bank study, an average housing project takes more than six years as compared to 15-18 months in China. The stamp duty in India ranges from 10 to 15 percent which is the highest level (of stamp duty) in the world. The National Housing and Habitat Policy of 1998 recommended a stamp duty rate of 2-3 percent but the implementation is still awaited. Reforms should be made in the proposed National Housing and Urban Habitat policy 2006 in a comprehensive manner. The sector also needs to get the status of an infrastructural industry, which attracts lower taxes and gets low cost funds. These legal reforms will help the Housing Market realize its true potential.
Source: 8 Oct' 07 Hindustan Times