WEST BENGAL’S PORIBORTON

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By: Sapna Srivastava Kolkata, like all other prime cities of India is slowly and steadily gearing its economy post pandemic to recovery across various sectors. As WFH is driving buyers interest towards tire- II and III cities, the city offers a potential of real estate growth of its suburbs, given the price advantage and open living spaces available for the buyers. The challenges of the realty firms remain, further enhanced by the pandemic yet the future seems bright. The state of West Bengal has huge economic growth prospects being the port hub and its strategic location as the gateway to the eastern parts of the country. However, Kolkata has not been positioned to attract manufacturing in the last many decades. Compared to other metros, the growth of IT/ ITeS industry too has been slow. With a rich availability of industrial, socio-cultural and human capital, it is high time that the state government relooks at its policies, land and labor laws and regulatory regime to create a diversified and multifold economic base for a sustainable growth in the long term. According to Amit Mitra, an Indian economist and the current Finance, Commerce & Industries Minister of West Bengal. “As per the latest data available on advance estimate, West Bengal will grow by at least 1.2 per cent, while drawing a contrast with the Indian economy, which is projected to contract by 7.7 per cent.” The state government is now looking to simplify procedure to allot land in the industrial parks operated by three government agencies. These agencies offered land on different terms and separate names – industrial parks, industrial estates and growth centres – to MSMEs as well as large industries. The state has also announced that terms of conditions of offering land, lease terms, transfer rate, etc. would be standardized and put up on the website. With the right steps in the right direction, the city can indeed emerge as a preferred destination for various businesses that will boost the housing demand as well as other real estate segments. KOLKATA, THE THIRD MOST POPULOUS METROPOLITAN AREA IN THE COUNTRY AFTER MUMBAI AND DELHI PRESENTS POCKETS OF OPPORTUNITIES FOR REAL ESTATE INVESTORS AND BUYERS. REALTY+ BRINGS THE VIEWS AND OPINIONS OF THE REAL ESTATE DEVELOPERS OF THE REGION. THE SALES TRENDS IN RESIDENTIAL REALTY SEGMENTS – AFFORDABLE MID-INCOME AND LUXURY Pradip Kumar Chopra, Chairman & Managing Director, PS Group: The sales trends in all segments (i.e. affordable mid-income and luxury) are presently going upwards and we expect this to continue as there is a lot of liquidity in the market. Again the stock market is booming and the interest rate is at its historically low. All these factors are contributing to this upswing. Pawan Agarwal, Director, NK Realtors: There has been an increasing trend in the affordable segment since August 2020. Comparing the pre-Covid 6 months of Sep 2019-Feb 2020 with the post lockdown of Aug 2020-Jan 2021, the average monthly sales has spiked up to almost 100%. And this appears to continue. In case of the luxury segment, in the last 3 months we have touched back the pre-Covid numbers. New launches are currently negligible. However, once new inventory comes in, the numbers are to rise proportionately. Basant Parakh, Managing Director, Orbit Group: The sales trend in all segments of affordable mid-income and luxury segment are on the rise after the Covid period especially in the projects nearing completion. The customers have realized the true value of a good home during the Lockdown. Projects with efficient planning and quality are seeing good traction. Pradeep Sureka, Promoter, Sureka Group: In the last year, there has been a good movement both in affordable mid-income and luxury housing, especially products that have been completed or are on the verge of completion. Mahesh Agarwal, Managing Director- Purti Realty: Sales trends have been positive, people have started valuing homes after the Pandemic and people who were postponing the decision to buy have actually understood the importance of owning one. Mid-income and Luxury have seen sensible figures and we feel this trend will only get better. Home purchase affordability among the top seven metros is on the rise. The cities include Mumbai, Delhi NCR (National Capital Region), Bengaluru, Chennai, Pune, Hyderabad and Kolkata. Kolkata has the best affordability, followed by Hyderabad. Mumbai was at the bottom among the seven metros. Nitesh Kumar Gupta, Managing Director & CEO, Emami Realty Ltd: Post Covid-19, plotted land development, standalone villas and affordable housing has seen a considerable growth. Mid-income housing has a demand also. The epidemic has made a brighter prospect for plotted land development, standalone villas as people want to maintain high level of hygiene and social distancing. As the market becomes end-user driven, buyers have a clear perspective of buying a house with all safety measures and flexibility to meet the constraints and limitations of the pandemic. Ashok Pasari, Chairman Pasari Group: Residential realty in all segments has shown a substantial growth post the lockdown of 2020. The pandemic has made every individual realize the importance of having quality space, ambience, facilities and better infrastructure. This self-realization has created an increase in demand for the housing segment across affordable, mid – income and luxury segments. Jitendra Khaitan CMD, Pioneer Property Management Ltd: Sales trend in residential realty segment has increased in the recent years with a significant demand for affordable housing. Affordable mid-income segment has registered 10-12% growth in the year 2019. Several new projects launches have been registered in affordable and mid-income segment within Kolkata and its periphery. There have been some initial signs of revival with the level of sales increasing by around 30% in the third quarter of 2020 as compared to second quarter. Quite a few luxury and ultra-luxury units were launched in 2019 in Kolkata along with other metro cities due to growing demand. There has also been a constant interest amongst NRIs for semi luxury and luxury apartments in and around Kolkata. “PREDICTION FOR WEST BENGAL REAL ESTATE MARKET FOR YEAR 2021 IS - EXTREMELY GOOD.” PRADIP KUMAR CHOPRA “FOR RESIDENTIAL & WAREHOUSING, THE YEAR 2021 LOOKS PRETTY BRIGHT. REST WILL CATCH UP GRADUALLY.” PAWAN AGARWAL “THE REAL ESTATE MARKET POST COVID HAS SEEN A REASONABLE AND PROGRESSIVE GROWTH AND IT IS EXPECTED THAT THIS MOMENTUM WOULD CONTINUE IN THE TIMES TO COME. BUT, FOR THIS TO SUSTAIN THE BUILDER COMMUNITY HAS TO CREATE QUALITY AND EFFICIENT SPACES AND MOST IMPORTANTLY DELIVER IN TIME.” BASANT PARAKH “THE REAL ESTATE DEVELOPERS ARE GRADUALLY EXPERIENCING RECOVERY IN SALES AND THE DEMAND FOR RESIDENTIAL REAL ESTATE WOULD RECOVER ALONG WITH STEADY PRICE HIKES IN THE YEAR 2021. WE EXPECT A HANDFUL OF NEW PROJECT LAUNCHES WHICH WILL PLAY A MAJOR ROLE IN REVIVAL OF REAL ESTATE MARKET.” JITENDRA KHAITAN “IT’S JUST GOING TO GET BETTER FOR WEST BENGAL REAL ESTATE MARKET IN THE YEAR 2021.” MAHESH AGARWAL “IF THE GOVERNMENT EXTENDS A HELPING HAND AND INJECTS ENOUGH STIMULI TO BOOST THE SECTOR, THE PACE OF REVIVAL CAN BE QUICKEN AND BOOST THE OVERALL ECONOMY. HOWEVER, ONE NEEDS TO BE CAUTIOUSLY OPTIMISTIC WITH THE PANDEMIC BEING STILL A CAUSE FOR CONCERN.” NITESH KUMAR GUPTA “PEOPLE ARE NOW LOOKING AT PROJECTS UNDER CONSTRUCTION TO MATCH THEIR LIKINGS. THIS SHOWS A SIGN OF SUBSTANTIAL GROWTH IN NEAR FUTURE AND IN COMING YEARS. WE ARE VERY POSITIVE THAT 2021 AND YEARS AHEAD WOULD CREATE LOTS OF DEMAND ACROSS ALL SEGMENTS.” ASHOK PASARI “WE HAVE SEEN A YEAR GO BY UNDER THE COVID-19 AND THERE ARE ASSEMBLY ELECTIONS IN THE NEXT TWO MONTHS. POST THESE EVENTS, I FEEL THAT THE WEST BENGAL REAL ESTATE MARKET WILL PICK UP, ESPECIALLY IN AFFORDABLE AND MID-INCOME HOUSING.” PRADEEP SUREKA THE RECOVERY OF THE OFFICE AND RETAIL REAL ESTATE IN KOLKATA Pradip Kumar Chopra: The recovery of office and retail real estate in Kolkata is comparatively very slow because retail is hit by on-line sales and the office market is hit because people are working from home. Pawan Agarwal: Office & Retail space is still in the recovery phase. Expected to bounce back by the next quarter. Basant Parakh: The recovery of office and retail real estate has also been on the rise and the requirement of small office spaces have increased significantly. The need for working spaces in and around established residential localities have also gained momentum after the Pandemic. As far as the retail spaces are concerned, more spaces are being taken for Entertainment and other F&B outlets. Earlier majority of the spaces were for fashion and electronics but now more spaces are dedicated for food, entertainment and leisure activities. Pradeep Sureka: Post the lockdown lifting, the retail segment has seen a bounce back. There has also been some movement in office space. Mahesh Agarwal: Retail is coming back to normal; it did scare people at one point of time but now that all the safety measures are in place, people want to get out. Office is another segment which we feel will do well in future. Nitesh Kumar Gupta: As the economy is on the fast pace of recovery and all fundamentals are very strong. It is expected that office and retail real estate will witness a moderate rise in demand. Commercial properties with locational advantage can attract very good rental returns and it is becoming a good investment option for real estate investors. Office and retail real estate after Covid pandemic has been majorly affected throughout the India. While residential real estate is spearheading the revival of the real estate demand. Customers are buying because of a lot of pent up demand which was stuck due to the pandemic. The market dynamics and revival has been fueled by demand from customers living in rented accommodation and NRI’s who wish to have an apartment back home. All this influenced by the pandemic. The deals are also being finalized based on the push from decreasing home loan rates. The retail and commercial market is also going up by July 2020. Employees are returning back post vaccination. Kolkata having less number of covid active patients revive sooner than the other parts of India. Ashok Pasari: The recovery of office spaces in Kolkata is more shifting from the unorganized CBD area to organized SBD and CBD areas. The lack of availability of quality space with the requisite area and infrastructure is missing in the existing CBD area. A lot of organizations have started moving their office space to the EM Bypass stretch, Sector –V and Rajarhat area. The reasons for the shifts are economical pricing, good connectivity, quality workspace and better infrastructure. All these factors ultimately helps the organizations to increase employee wellness and ensure a better work life balance. The retail spaces are slowly and steadily seeing their footfalls coming back to 65%-75% compare to pre-pandemic era. It is expected that within another few months the retail segment would be back on track. Certain segments related to hyper/super markets are seeing large acquisitions. Jitendra Khaitan: Retail and real estate sector in Kolkata has experienced slow but steady growth post pandemic as there has been slight increase in demand such from sectors such as FMCG, healthcare, e-commerce, etc. The third quarter of 2020 has seen a significant dip in comparison to office space transactions in the year 2019. It has been observed that the transaction in office and retail real estate sector was approx 4 lakh+ sqft earlier. However, due to the pandemic, the demand decreased drastically in July-September 2020 quarter. Nonetheless, from OctoberDecember 2020 quarter, this sector has seen some revival which has even improved the transaction values in January-March 2021 quarter. Office markets across top 7 cities (Mumbai, Delhi NCR (National Capital Region), Bengaluru, Chennai, Pune, Hyderabad and Kolkata) are expected to witness total net absorption of 30 mn sq. ft during 2021 as against slightly over 25 mn sq. ft in 2020 THE CURRENT MAJOR CHALLENGES THE WEST BENGAL REALTY SECTOR IS FACING Pradip Kumar Chopra: The bureaucratic hurdles are the major impediment for the realty sector in West Bengal. The Urban Land Ceiling Act only exists in West Bengal while it has been repealed in all other states. Pawan Agarwal: There are few broader challenges, if can be addressed, will bring in a revolution to the realty sector in West Bengal. Kolkata was the first city to get the Metro rail in the country. For whatsoever reason this infrastructure could not be enhanced and now we are far behind the other cities. This has impacted a lot. The ULCA or the Urban Land Ceiling Act prevents an individual/entity the possession of a large parcel of land thus prohibiting any large real estate development. Weak/negative perception of the state among external investors. Though we have all kinds of infrastructure, still we lack external investments. This has a huge impact on the realty sector. Lastly, the road infrastructure in suburbs or fringe areas is not up to the standard. As an outcome development has slowed down immensely. However, the city is bound to grow with time and that is happening gradually. Basant Parakh: The major challenges in West Bengal realty sector is the law of Urban Land Ceiling because of which larger and cheaper chunks of land are not being able to be used for real estate development. Even to get the Urban Land Ceiling clearances takes inordinately long time which effects viabilities of the projects although the ease of doing business is gaining momentum. The various Government Departments and sanctioning authorities needs to be aligned to achieve ease of doing business. A thrust on the industrialization as well as on IT sectors would help giving the boost to West Bengal realty sector as majority of young IT professionals and migrating to Bombay, Bangalore & Pune. Pradeep Sureka: One of the biggest challenges in West Bengal is the Urban Land Ceiling Act and the sanction and approval process in areas outside the municipality limits which adds costs to the affordable mid-income housing. Mahesh Agarwal: Challenge is clear and clean available land, letting go of outdated laws; and time it takes from just an idea to conceptualizing to launching a new project (everything has a cost). Nitesh Kumar Gupta: West Bengal developers were already reeling under the short-term impacts of major policy overhauls such as Demonetization, HIRA, and GST. When India witnessed one of the world's strictest lockdowns (almost 3 months) which muted the demand. Real Estate sales fell almost 50 per cent year-on-year in 2020 across the country. The biggest challenge faced by the real estate sector was the receipt of timely approvals from the governing authorities. The state has been encouraging investment in real estate by offering several measures viz single window clearance mechanisms and online approval process to spur the real estate demand. Ashok Pasari: The current Industrial policy especially in the field of IT industry needs some modification to attract organizations to invest in the state. Urban land ceiling is a major road block in terms of acquiring large chunks of land which makes any project more economically viable as well by providing quality development which in turn benefits the end users by getting quality spaces at better pricing. The Act as of date is only implemented in West Bengal state whereas it has been abolished from all other states in India. Faster and smoother implementation of the single window clearances will oversee a major challenge in the realty sector. Jitendra Khaitan: The biggest challenge that West Bengal real estate sector is currently facing is decline in new project launches. The developers are currently focusing more on selling the unsold inventory and hence are not launching new projects. From October 2019 – October 2020, Kolkata has experienced around significant fall in new project launches. The construction work due to the pandemic had completely stopped and hence the developers are taking the extra mile to complete their projects in order to deliver the same on time. But due to the delay in handing over the possession beyond the control of the developer, the most difficult challenge the West Bengal realty sector is facing is to bring back the buyers confidence of getting their flats/apartments on time in the ongoing projects standard. As an outcome development has slowed down immensely. However, the city is bound to grow with time and that is happening gradually. Basant Parakh: The major challenges in West Bengal realty sector is the law of Urban Land Ceiling because of which larger and cheaper chunks of land are not being able to be used for real estate development. Even to get the Urban Land Ceiling clearances takes inordinately long time which effects viabilities of the projects although the ease of doing business is gaining momentum. The various Government Departments and sanctioning authorities needs to be aligned to achieve ease of doing business. A thrust on the industrialization as well as on IT sectors would help giving the boost to West Bengal realty sector as majority of young IT professionals and migrating to Bombay, Bangalore & Pune. Pradeep Sureka: One of the biggest challenges in West Bengal is the Urban Land Ceiling Act and the sanction and approval process in areas outside the municipality limits which adds costs to the affordable mid-income housing. Mahesh Agarwal: Challenge is clear and clean available land, letting go of outdated laws; and time it takes from just an idea to conceptualizing to launching a new project (everything has a cost). Nitesh Kumar Gupta: West Bengal developers were already reeling under the short-term impacts of major policy overhauls such as Demonetization, HIRA, and GST. When India witnessed one of the world's strictest lockdowns (almost 3 months) which muted the demand. Real Estate sales fell almost 50 per cent year-on-year in 2020 across the country. The biggest challenge faced by the real estate sector was the receipt of timely approvals from the governing authorities. The state has been encouraging investment in real estate by offering several measures viz single window clearance mechanisms and online approval process to spur the real estate demand. Ashok Pasari: The current Industrial policy especially in the field of IT industry needs some modification to attract organizations to invest in the state. Urban land ceiling is a major road block in terms of acquiring large chunks of land which makes any project more economically viable as well by providing quality development which in turn benefits the end users by getting quality spaces at better pricing. The Act as of date is only implemented in West Bengal state whereas it has been abolished from all other states in India. Faster and smoother implementation of the single window clearances will oversee a major challenge in the realty sector. Jitendra Khaitan: The biggest challenge that West Bengal real estate sector is currently facing is decline in new project launches. The developers are currently focusing more on selling the unsold inventory and hence are not launching new projects. From October 2019 – October 2020, Kolkata has experienced around significant fall in new project launches. The construction work due to the pandemic had completely stopped and hence the developers are taking the extra mile to complete their projects in order to deliver the same on time. But due to the delay in handing over the possession beyond the control of the developer, the most difficult challenge the West Bengal realty sector is facing is to bring back the buyers confidence of getting their flats/apartments on time in the ongoing projects. THE EXPECTATIONS FROM THE GOVERNMENT TO EASE LIQUIDITY STRESS IN THE SECTOR Pradip Kumar Chopra: The Government has already eased the liquidity crunch. All the banks are back to finance real estate projects, housing loans are easily available and at very attractive rates and terms and therefore there is no liquidity crunch for established players in real estate or for home buyers. Liquidity for the sector remains an issue, with funding from PSU and private banks slowing down and NBFCs still under strain. Many cash strapped developers are banking on sales or advances as their primary cash flow. If sales slowdown, project deliveries will be delayed creating a stress in the market. Pawan Agarwal: Firstly, reduction in stamp duty for a given time period. Like in few other states, it has worked well. Secondly, introduction of a single-window-clearance system and clearances within timelines. Basant Parakh: The government whether Central and the State have always treated the realty sector with a pinch of salt. The sector is one of the biggest contributor to the state and central revenues. Real Estate directly or indirectly effects more than 200 industries and is also the second biggest employer of skilled and unskilled manpower. All the governments have emphasized the need for a shelter and therefore adequate, separate and liquidity from financial institutions must be given to the real estate sector at affordable interest rates. While the interest rates for housing finances have been continuously reduced, the rate of interest for construction finance has not got the attention of the authorities. The financial institutions still remain cautious and conservative while financing real estate projects despite RERA in place. It’s pivotal that Real Estate is given an “Infrastructure” status. Pradeep Sureka: The government has been making efforts to ease liquidity stress in the realty sector and I feel that today projects and developers of quality are able to borrow from banks. The challenge is on stressed assets for which some innovative products have been offered by the government. Mahesh Agarwal: Increasing Government Spending and sensible taxation policies. Nitesh Kumar Gupta: Real Estate is one of the most important sectors to enable the country to reach the $5-trillion economy goal and to achieve the mission of “Housing for All. Real Estate industry needs ease of doing business, Affordable capital availability and relevant tax cuts along with single window Clearance. The other expectations which will push growth in real estate are lower home loan rates, increased funding at project level and eased out approval process, availability of input credit on GST and Income Tax rebates. Ashok Pasari: The government has recently reduced the RBI repo rate which in terms has reduced the cost of borrowing for the home buyers resulting in an increase in sales. However, the rates are still on the higher side when compared to other developed countries. Having a home is a necessity and the government should substantially provide concession on the interest rates for the home buyers to achieve the necessary requirements of our citizens. Real estate is a very cash intensive business and availability of construction finance is of utmost importance to complete the project cost effectively and timely. The ease of availability of construction finance is very important at today’s stage. If the government aggressively looks into the above two matters it will make the cost of buying home more affordable for home buyers and thus the vision of our Prime Minister of having home for every Indian would come true. Jitendra Khaitan: Recent study has highlighted some of the key expectations from the government for the real estate sector including the improvement of liquidity, balancing of fiscal discipline with stimulus and increasing resolution of stressed projects. The sector assumes that the government may push banks and NBFCs to reintroduce the subvention scheme which will act as a major boost for both buyers and developers. Affordable housing is going to witness a significant growth. Government is also expected to increase the limit of affordable housing to Rs 1 crore from the current cap of Rs 45 lakhs or alternatively also raise the size cap of 30 sq mtr to60 sq mtr. This would ensure more upcoming projects that are affordable for the welfare of larger section of population. Furthermore, government is also likely to ensure relaxation in capital gains to provide benefits to developers which in turn will help to control the cash flow within the real estate market.