Extortion and the rising cost of real estate
Tuesday, 21 July 2009
Mustafa Anwar
THE real estate sector produces and sustains the business of house building materials. It creates the demands for all construction materials. It directly employs a large number of workers. It also creates employment for the production of the whole range of building materials. Any decline in the housing sector creates a chain effect on the producers, distributors, workers, suppliers and others directly or indirectly connected with the real estate industry.
The sector drew a substantial amount of investment. In the budget for fiscal year (FY) 2009-10, the government has allowed, once again, the facility of making investment of 'undisclosed' income in purchases of apartments and housing plots on the basis of some fixed rates, depending on the location of flats and units. This facility is meant for use by the buyers, for the purchase of one flat or residential plot only. Such a step will certainly raise the demand for flats and residential plots. There are also some other incentives by the government by way of adoption of appropriate fiscal and other policies. The latest monetary policy indicates that the banks would play a supportive role in facilitating the flow of credit funds to the real estate sector.
But lending rates on housing loans, are still considered too high by many. This has been acting as a disincentive for the growth of the industry. Many people, who want to buy flats, find the interest rates on loans unbearable.
The government needs to take a pro-active role in this connection. It has to take the lead role in arranging funds on easy terms and link the same with the domestic financial institutions for meeting the needs for land to flat buyers at low lending rates. It should also motivate developers to build flats for the middle and non-affluent classes.
The sale of 'khas' lands to Rehab members at cheaper prices, as suggested by the association of the real estate industry, can help address the need of the middle and low-income groups to buy flats or plots at affordable costs. The registration costs of land and other taxes have been scaled down somewhat under the new budget. The government should nonetheless examine the possibility for any further cuts in this context. All these measures would bring down the costs of flats for the low income buyers. At the same time, the law enforcement agencies should ensure that no developer is harassed by extortionists.
THE real estate sector produces and sustains the business of house building materials. It creates the demands for all construction materials. It directly employs a large number of workers. It also creates employment for the production of the whole range of building materials. Any decline in the housing sector creates a chain effect on the producers, distributors, workers, suppliers and others directly or indirectly connected with the real estate industry.
The sector drew a substantial amount of investment. In the budget for fiscal year (FY) 2009-10, the government has allowed, once again, the facility of making investment of 'undisclosed' income in purchases of apartments and housing plots on the basis of some fixed rates, depending on the location of flats and units. This facility is meant for use by the buyers, for the purchase of one flat or residential plot only. Such a step will certainly raise the demand for flats and residential plots. There are also some other incentives by the government by way of adoption of appropriate fiscal and other policies. The latest monetary policy indicates that the banks would play a supportive role in facilitating the flow of credit funds to the real estate sector.
But lending rates on housing loans, are still considered too high by many. This has been acting as a disincentive for the growth of the industry. Many people, who want to buy flats, find the interest rates on loans unbearable.
The government needs to take a pro-active role in this connection. It has to take the lead role in arranging funds on easy terms and link the same with the domestic financial institutions for meeting the needs for land to flat buyers at low lending rates. It should also motivate developers to build flats for the middle and non-affluent classes.
The sale of 'khas' lands to Rehab members at cheaper prices, as suggested by the association of the real estate industry, can help address the need of the middle and low-income groups to buy flats or plots at affordable costs. The registration costs of land and other taxes have been scaled down somewhat under the new budget. The government should nonetheless examine the possibility for any further cuts in this context. All these measures would bring down the costs of flats for the low income buyers. At the same time, the law enforcement agencies should ensure that no developer is harassed by extortionists.