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Assam tops in real estate investment, then falls flat

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  21 April 2015 12:00 AM GMT

AREIDA blames unfavourable government policies, interference from agencies, frequent changes in master plan and building bylaws

By Our Staff Reporter

Guwahati, April 20: The good news is that Assam has recorded the highest growth in the country in attracting investments in the real estate sector over the last four years. But the bad is that more than half the ventures were not successful, primarily due to accommodative policies of the State government.

Clocking a compounded annual growth rate (CAGR) of about 82 per cent, Assam has recorded maximum growth in attracting investments in the real estate sector from 2011-12 to 2014-15, followed by Bihar (19 per cent), Odisha (17 per cent), Uttar Pradesh (16 per cent) and Uttarakhand (12 per cent) among top five performing states, according to a study by Associated Chambers of Commerce and Industry of India (ASSOCHAM).

This is despite the fact that investments attracted by the real estate sector from various public and private sources across India have declined by six per cent in past four years i.e. from a level of Rs 15.2 lakh crore in 2011-12 to about Rs 14.3 lakh crore as of 2014-15.

President of the Assam Real Estate & Infrastructure Developers Association (Areida) PK Sharma admitted that the State had attracted huge investments from both outside the State and within in the real estate sector during the last four years. “Metro cities are saturating. That is why companies are looking towards tier 2 and tier 3 cities. Guwahati, being the hub of Northeast India, was an obvious choice. There were a lot of investments during the period, even in township projects. Businessmen from within the region were also investing in the real estate,” he said.

“But unfortutely, a sizeable percentage of them could not sustain. Things did not turn out to be as the companies expected,” Sharma went on to add.

This, he said, was due to various reasons, which included unfavourable government policies and interference from various agencies. “The dymics in Guwahati is not like those in Gurgaon, Ahmedabad and other cities. The investors had a notion that the people from other states of the Northeast are migrating to Guwahati, but in reality it is not. People are not coming to Guwahati, they are actually moving out of the region,” Sharma pointed out.

Citing another reason why the projects could not sustain, Sharma said there have been frequent changes in building bylaws and the masterplan. The government policies were not accommodative. “Maybe the government was right (in discouraging investments). After all, Guwahati will not be livable with too many buildings coming up,” he said.

The ASSOCHAM survey also pointed out that the proposals in this year’s annual budget were not favourable to the real estate sector.

Increase in rate of service tax to 14 per cent will make real estate a bit more expensive and will impact sales, as it would wear down the purchasing power of an average consumer. Real estate developers are also concerned about increase in service tax on construction and excise duty on input goods, as also increase of petrol and diesel prices coupled with increase in freight rates on cement — will lead to rise in construction costs.

According to ASSOCHAM, no additiol incentives were announced to promote affordable housing sector which is already facing problems in the form of high costs and low margins.

Referring to urgent need for speeding up procedural requirements for real estate sector, the industry has pressed for a single window clearance system for various approvals leading to operatiol efficiencies and cost saving. Respondents also indicated that there is a need for a predictable and stable policy framework.

Many developers also said they expected some announcements related to lowering of land cost, measures leading to quick approvals and grant of infrastructure status to the real estate sector. However, their hopes were belied.

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