By: Sunil Dahiya, Managing Director, Vigneshwara Developers
Land acquisition has become a very contentious issue these days. There are some states where land acquisition has evoked public protest and at some places these are politically motivated as well. Well, from a development standpoint it obviously reflects there is a gap in the acquisition process. But I feel what the government should strongly focus on is to eradicate the misuse in the industry. Government is trying to stop the use instead of stopping the misuse.
Largely what we see is that the blame is shifted to the private builders. The land is solely not been acquired by builder and they are the ones getting better housing plans for the common people. However, the bigger issue is who will handle the housing? The government has not been able to provide housing or urbanization. Some one has to fill this demand-supply gap. Are we looking to create more slums? Are we looking to denigrating urban areas further, creating more unregulated developments? Therefore, builders are taking the initiative of making best use of the opportunities.
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?
Since the banks collects the money from the general public and funds certain projects, therefore it is public money. However the question is who will fill the gap is it the banks, FII or FDI’s? We need to find an answer to that. Therefore the customer’s wish to put in just 10% subscription and the balance payment when he gets the actual delivery of the property. This is a mature model of an economy. In America, Canada, UK, you put up a 10% subscription and the rest is funded by the banks. When the actual delivery comes, then the customer pays through a mortgage. That bridges the gap, and the funding is thus converted into housing loan. So is this the model we should adopt for modern urban India?
If customers are comfortable putting up 10-25% of the subscription and then watch a project, that signifies they are genuinely interrelated in the property. And if that needs to be funded, then we should find a way out to bridge the gap. The government role comes into picture by acting along with the banks and the builders as stake holders as how to meet ones needs of funding, whether it should be done through public money, PSU banks or the private banking institutions.
However, with a defined model of funding we see India going towards a more regulated development system. Otherwise, this gap goes up to almost 50-60% at times, because the developer has already put in 30% by the time he gets a license for the project, the customer is putting in about 20%, rest 50% is the gap. Who pays this 50% gap? If no one does, the project goes into a logjam. Therefore these are the problems which the housing authorities are facing.
