The Confederation of Real Estate Developers’ Association of India (CREDAI) has estimated that the sector will face a funding gap to the tune of USD 70 billion over the next five years.
CREDAI President Lalit Kumar Jain said such a situation might create hurdles for the industry to grow if the Reserve Bank of India is not “proactive”.
“The housing that is required in the current Five-Year Plan is 24.6 million and it is 37 million in the next Five-Year Plan. We require USD 3.2 trillion (to meet the target). Funding gap in housing will be around USD 70 billion in the next five years. The USD 70 billion is among the current developers only,” Jain told PTI.
He was speaking ahead of the third edition of the National Association of Realtors (NAR)-India Convention 2011, a two-day convention and exposition set to begin here on Monday, July 25.
“Foreign investments do not solve the problem. They are very costly and cannot be affordable. There has to be generation of funds internally and RBI has to be proactive on this issue,” Jain added.
He said any FDI into the country would expect a 30 per cent return on investment, which is not possible in real estate projects and hence not advisable.
The RBI only allows real estate companies to tap external commercial borrowings (ECBs) for township projects spread over a minimum 100 acres of land, Jain said, adding that small players cannot go for ECBs.
Many realtors agree with this view. Sunil Dahiya, Managing Director of Vigneshwara Developers question who is supposed to fill the gap in funding. “Generally, once you pay up even 10%, you are considered a customer and customer is supposed to be the God. Now with just 10% of the subscription and in case of default, who is going to fund this gap .Is this gap supposed to be filled by the developer, government or by the banks…,” he asks.
