Timely project approvals. The key to a healthier real estate industry in India

When you read about the general Indian real estate market scenario, a few key terms will keep recurring in the texts. They are input costs, home loan interest rates and statutory project approvals. For any real estate project to be successful; it has be completed on time, built with good quality materials, finished well while also making a decent profit for the equity holders in the project.

Currently, the problems being faced by Indian real estate builders have become compounded by the loss of sentiments caused by the downgrading of the US credit ratings. Some say there are going to be long term effects on Indian real estate as well.

If we consider the recurring points mentioned above, input costs and interest rates are subjects that are not in control. No economic or fiscal policy is 'country border tight' and this is a complicated interlinked world economy. Inflation remains high and interest rate hikes are one way that the RBI thinks that it can control inflation. They have tried their bit but it does not seem to be working right away.

That leaves Project Approvals. Delays in securing the necessary approvals to finish a project on time causes immense financial loss. Project CoDs (Commercial Operational Dates) are pretty inflexible things and debt repayments need to start as per schedule, whether your customer payments are coming in or not. Also, add to that customer dissatisfaction, erosion of brand equity and massive delay compensation payments to the buyers who are all crying murder, frustrated by project delays.

These unnecessary payouts and delays in securing construction linked payments by the builder hits profit margins hard in an industry already hurt by the other two factors which cannot be immediately controlled. A third of the problems could be eased with a system to fast track project approvals and have a one window system in place, putting in place better margins, improved customer satisfaction and a general feeling of better health for the real estate industry of India. And, this is just a process issue which is completely achievable!

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2) Real estate prices in India upwardly mobile. Blame it on rising input costs

3) How is the US credit rating downgrade going to affect the Indian real estate Industry?