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Realty Sector Should Focus on Corporate Governance, Says Puri

Industry can expect more conducive environment but should clean up its act

Minister for Housing and Urban Affairs Hardeep Singh Puri has asked the real estate industry to put its house in order by addressing corporate governance issues. “There can be no bailouts unlike in the past,” he asserted while addressing industry leaders at the CII Realty 2019 conference in New Delhi yesterday. He also released the CII – CBRE knowledge paper ‘Real Estate: A Relook’.

While complimenting real estate players for their dynamism and contribution to the nation’s economy, the minister said that the government is ready to be their port of the first call. “The real estate sector is the second-largest employer in the country and its contribution to the GDP is unquestioned. We are therefore ready to listen to the concerns and help in building the ecosystem where real estate can flourish. However, there can be no bailouts if you do not manage your businesses properly. Being ethical is not enough; there needs to be more transparency and customer-oriented practices.”

Citing the example of the aviation sector, of which he holds an additional charge, Puri said that when Jet Airlines shut down there were around 550 planes in the air and today there are over 600. “Going by the order books, we expect there to be over 2,000 planes in the air in two years.” Puri was referring to the growing demand for infrastructure in the country, indicating that real estate and particularly housing were no different.

Stating that the Real Estate (Regulation & Development) Act, 2016 was a major landmark for Indian industry, Puri said that the country has moved from pre-RERA to the post-RERA era. “There were the times when people with gunny bags full of money would head for the builders to park their funds. But those unscrupulous times are coming to an end, and real estate is much more organised and transparent.”

Speaking of demand potential, Puri rolled out a host of figures to show what the real estate industry was faced within the coming years. “Affordable housing would be the major driver for your industry. Of the target of 10 million houses, we have already sanctioned construction of 8.5 million, and of these over 8.00 million are already grounded. We are sanctioning 3,000-5,000 houses every month.” Stating that nearly 70% of the country’s infrastructure was yet to be built, he informed that 700-900 million sqm of real estate was being built annually across the country.

While thanking the minister for the government’s supportive approach, Hero Enterprise chairman and past president CII Sunil Kant Munjal made a case for according priority sector status to the real estate industry. “While housing has rightly been prioritised, we would urge you to consider extending this status to the entire real estate sector.” In his opening remarks earlier, Munjal had urged his fellow industry players to consider living up to their brand promises, just as the auto sector had been doing. “The auto sector, which is near-global levels in terms of technology and quality, is quite competitive and responsive to demand. Similarly, real estate should also transform into a more responsive and trustworthy sector.”

The minister responded by assuring that his ministry was already in consultation with other concerned departments regarding the issues raised by realty sector, particularly financing, and “would be stepping on the gas in coming weeks.”

Anshuman Magazine, chairman of CII Realty 2019 and CBRE India chairman & CEO, in his opening remarks, acknowledged that the realty industry was growing at a healthy clip on the back of new technology, policy reforms, and the emergence of new asset classes.

Raising the spectre of litigation dragging down the growth of the industry, PNB Housing Finance managing director Sanjaya Gupta warned that industry needed to be careful in the face of rising consumerism. “There are about Rs 19 lakh crore worth of housing loans outstanding, and nearly half of these projects are under construction and committed to delivery in 18-24 months. Even if five percent of these under-construction projects go into litigation due to unmet commitments, we are faced with the prospect of nearly five lakh new cases in the courts.”

Anil Saraf, co-chair of CII Realty 2019 and CMD of ASF Group, while thanking the minister, asserted that the industry should “try to do its own thing instead of waiting for the government to take the lead.” He added that the realty industry was undergoing a transformation due to rapid changes in technology and a more responsive government, besides shifting consumer preferences.

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