Mushrooming urban slums and the exodus of migrant workers during the two-month lockdown period highlight the failure of urban planning in India, says billionaire realty mogul K P Singh, adding that real estate business can be a major driver for reviving the economy in the post-COVID world.
“One of the most important sectors of the economy, which is called urbanisation, includes real estate, construction and urban infrastructure. Now these all three are the most highly neglected sectors. Unfortunately, these should be the most important sectors of the economy,” Singh told PTI in an interview last week.
Wrong urban development policies and inaccurate assessment of urbanisation by the Planning Commission led to creation of slums that eventually caused the migrants crisis, he said just before stepping down as chairman of India”s biggest real estate firm DLF Ltd, handing over his post to son Rajiv. Singh is now chairman emeritus of DLF.
A major structural change is required to set things right, and Prime Minister Narendra Modi is in the best position to do it because he has the capacity and the mandate, said the 90-year old industry veteran.
Singh rued that the real estate, construction and urban infrastructure sectors have been completely neglected in India, unlike other nations such as America where the growth of these industries are considered as major economic indicators.
The government, he said, should give importance to the real estate sector, even more than the MSMEs, as it has the potential to absorb a large number of unemployed people and revive the economy when it has been crushed by the COVID lockdown since March 25.
He pitched for tax incentives as well as ease in taking home loans at lower interest rates to boost both demand and supply in the housing segment.
Asked about his assessment of the multi-year slowdown in the realty sector, Singh said the demand slowdown was not because of the demonetisation, the GST and the new realty law RERA but due to wrong urban development policies.
The real estate and construction sectors generate most direct and indirect employment and is a biggest multiplier of the country”s GDP, he said.
“You construct more houses. More cement is required, more steel is required, more paints are required, and more labour, skilled and unskilled, is required. So, the problem is not the GST or the demonetisation. The problem is our entire urban policies in India are completely wrong,” Singh said.
It requires major structural changes to correct mistakes committed over several decades, he added.
Unlike in other industries, he said it is not easy to correct mistakes in the real estate where construction of buildings has taken place and one cannot demolish it.
Singh said the government”s urban policies should have facilitated development of satellite towns by private sector players to cater to the migration of people from rural to urban areas.
“… urbanisation means visionaries to plan for several decades, sometimes centuries ahead,” he said.
In a democratic country, Singh said people will have aspirations for better lives, in search of which they migrate to big cities.
He said the urban policies failed to cater to this influx of migration.
“The urban policy involves catering for those teeming millions and millions of workers who come from villages in search of jobs. Now, the first principle of that is to cater for them. These are visions. you think not 10-20 years ahead, but 50-100 years ahead,” he observed.
The satellite towns should have been developed for the workman or migrant, with proper facilities of accommodation and fast transportation network to reach their workplace, Singh said.
“Now this was completely neglected. As a result, what you find today 60 per cent of India is in slums. Why should we have Dharavi? Why should you have slums, because they never catered for that there is something called workmen class,” he said.
To accommodate these workmen class, Singh said satellite towns should have been created.
“This has been completely neglected. That is why you see the faces of migration people going… this is the tip of the iceberg. It is going to explode in a big way…,” he said.
Asserting that it was not GST and demonetisation that were responsible for slow demand, Singh said: “It is a basic flaw in urbanisation policy of the government and time is there to have a complete new look and new structure.”
“I will say therefore, there has been a complete failure of our Planning Commission. They did not envisage this invasion of urbanisation,” he said.
Urbanisation and infrastructure of urbanisation are big issues which should be examined and set right.
“Only a person like PM Modi can do it. Because he is a man who means action. He has a mandate and he has the capacity to do something which is unusual because others could not do but he has the capacity,” Singh said.
He said one should learn lesson from past mistakes and restart again more intelligently.
“So, all you people, everybody says GST and demonetisation. No, not at all. This is a small thing. The larger picture is reorient and restructure urbanisation policy,” he said.
On the housing demand, he said globally the highest importance is given to construction and real estate business.
Singh cited the example of China, which is focusing a lot on construction activities to revive its economy post COVID-19. In America and many other countries, he said the number of new houses being built is an economic indicator.
To create housing demand in India, he said it should be very simple for anyone to go to any bank and get home loans.
“Like what happens abroad, a mortgage loan is at ridiculously low, low rate. Second, so easy that you go to a bank and within a week you get it because banks do not give money like this one, there is an insurance set up of the government which guarantees the bank for any mortgage loan given,” Singh said.
He said the government should offer tax incentives on home loans to boost housing demand.
More tax sops should be provided for purchase of second homes if the same is let out, he said, adding this would give a great push to rental housing.
Singh said in the UK the general tax is 42 per cent but if one rents out property it is 18 per cent.
On the concept of affordable housing, he said: “What is affordability? What is not affordability? These are all artificial barriers. Marketplace decides what is affordable.”
The supply should be incentivised to give people choice and buy according to their affordability, he said. “Developers will only construct those items, which market will absorb. They will never construct something for which market is not there.”
He also termed it as “strange” that the government has removed input tax credit on the GST as it has led to an increase in unit cost.
Singh felt that the real estate should be given “greater priority than MSMEs”.
“Whatever wrong has gone. You cannot set it right overnight. That is a different story. What I”m saying in future you can rev it up by reorienting, restructuring the entire real estate construction industry. If you do that, take it from me. It will have an immediate multiplier effect. migrant labourers will come back,” Singh concluded.