By Ajit Chak
The real estate sector is in the midst of the doldrums after the demonetisation exercise, which has indeed dealt a blow to this sector, for it was seen as the biggest repository of black money in the nation.
The real estate sector saw phenomenal growth in the years of the UPA regime and this was the same time when economists warned that the money earned from scams and drugs and money related to terrorism were being funnelled into the real estate sector leading to an artificial boom and one day we would end up like China and create infrastructure beyond the requirement of the present generation.
As far as premium and luxury housing goes, the real estate sector saw huge investments and was already facing a slowdown even before demonetisation.
Demonetisation in being projected as having dealt a severe blow to the real estate sector however it is not demonetisation but the general crackdown on black money which is putting the sector into paralysis.
It was greed which fuelled the growth of the real estate sector in the nation. It is rumoured that senior politicians and corrupt bureaucrats funded builders so that they could multiply their ill gotten wealth and there are allegations that some such politicians and bureaucrats own or have in their portfolio not one, not hundreds but thousands of flats. Some builders in states like Uttar Pradesh even became politicians and Rajya Sabha MPs.
Today there are thousands of homeless in Uttar Pradesh and thousands without sanitation, but at the same time we have not thousands but lakhs of unoccupied flats which are not getting occupants because they were created by greed and their pricing today is unrealistic in the true terms of the word.
What the real estate sector needs today is not government intervention as there should be no attempt to rescue the greedy and the corrupt by the government. What the sector needs is a price correction and the government should take over the projects of the private builders by simply handing over the projects to the banks.
Several prominent builders have taken up to seven to eight years to hand over flats to buyers and today want to sell the remaining flats at a premium. Unfortunately for them the flats are not selling at those rates.
If a builder booked a flat for Rs 50 lakh say eight years ago they want to sell these flats at Rs 90 lakhs today. However given the current crackdown on black money and corruption no one has the money to throw into the real estate furnace any longer.
If the banks take over the projects they could easily restructure the prices to sell the flats at Rs 50 lakhs so that they are sold and the dues paid to the banks. However a strong lobby of politicians could allegedly try its level best to ensure that this does not happen as they allegedly have strong stakes in real estate deals and would lose tremendous astronomical amounts of money if this happened.
For those in the media who analyse investment trends in the nation, this can only mean that resistance of this nature on the part of seller will only further the crisis and deepen the crisis.
Those with black money can never be losers in the world today as they will find ways and means to invest that money in Singapore or Australia or New Zealand or Europe or anywhere in the world where they feel the government of India cannot reach them at present, but in case the price revision does not take place and the banks are not allowed to take over the projects the funds of thousands of genuine investors will be trapped especially in Uttar Pradesh where there are several ill conceived and half baked real estate adventures.
The government has to come up with a plan to salvage what remains of the real estate sector but remove the builders who do not fall into line first.