REALTORS TEMPTED TO TOE GOVT LINE IN HOUSING SECTOR
The government is considering a proposal that seeks to boost the public-private partnership model to
the housing sector , encouraging state-run institutions such as National Housing Board (NHB) and the Delhi Development Authority (DDA) to tie-up with private realty developers to ensure that projects are executed in time and the supply of new houses remain intact regardless of fluctuations in the market.
According to a person involved in the process, the scheme will work the same way financial intermediaries underwrite corporate bonds and initial public offers in case there is a shortfall in subscription by the targeted investors.
India already has a shortfall of 20-25
million housing units in urban areas , which is expected to go up as the country gets more urbanised regions. Public agencies such as DDA and Haryana Urban Development Authority (HUDA) sit on huge land tracts and tapping the private sector will be beneficial for both parties as well as the common man, goes the reasoning behind the proposal.
The person, who wanted to remain anonymous since the draft needs to be cleared by the Planning Commission and the Urban Development Ministry before it is put out for an open feedback from the private realty players, said the scheme would apply to only those projects where government agencies have a role to play.
According to the plan, an agency like HUDA, instead of constructing projects on its own, will sell off the
land for a private developer with a rider: the maximum price the developer can charge from buyers will be fixed by the agency. Alternatively, it will assure the developer that it will buy the unsold flats, if any.
The scheme, once approved, will be run on a trial basis with a state government that is not constrained by the Fiscal Responsibility and Budget Management norms. R V Verma, executive director of NHB, told SundayET that the PPP model would result in higher efficiency, sustainability of funding and construction with the 'backstop' underwriting facility extended by the public agencies with government support.
"The whole efficiency of the structure would lie in the clarity around the role of each actor, commonality of objective and performing to scales in a partnership mode," he said.
KPMG's executive director and head of
infrastructure and government practice Jai Mavani said the proposal may result in credit enhancement but cautioned that developers should not be completely insulated from the risks involved in projects.
"Underwriting could certainly be a carrot for developers but it can backfire if they have no skin in the game. Complacency could result in lowering of the quality standards and timeliness of the delivery," he said. According Mr Mavani, underwriting ideally should cover only costs and not the margins, otherwise it would operate as a subsidy. "This is not necessary given the maturity of the industry and existence of a number of players," Mr Mavani said.
A high-level committee comprising various stakeholders will soon be set up to fine tune the proposal.
Courtesy:- ET dt:- 12-07-09
