Mumbai, Feb 14 (PTI) Union minister Nitin Gadkari on Friday said realty players need to become more practical and bring down the cost of construction to revive the already stressed real estate sector.
Speaking at the launch of a book titled 'Nano Housing' authored by Haware Properties Chairman Suresh Haware, Gadkari said developers should be more sensitive towards the paying capacity of homebuyers and accordingly rationalise prices.
'Since builders have been enjoying 40-50 per cent returns on sales, it is becoming difficult for them to accept the reality and rationalise the prices. I agree there is a stress in the sector, but developers should also adopt practical approach and strive to bring down the costs to make homes more affordable,' the transport minister said.
According to Gadkari, while the ideal cost of construction should be around Rs 800 per sq ft, except Mumbai, the cost of land should not be more than Rs 300-400 per sq ft.
'The return expectations should be more rational at around 15 per cent. If developers continue to keep the prices high, expecting the sector to revive and give the same returns as it did earlier, then they will be doomed. Developers need to gauge the paying capacity of buyers and develop projects accordingly,' he added.
Gadkari further said nearly 90 per cent of the population can afford to buy homes priced below Rs 5 lakh, while 5-6 per cent can buy Rs 10-12 lakh worth properties.
'This is the kind of market that developers must cater to. There has to be a focus on developing affordable homes through township developments where cost of land as well as of construction can be brought down significantly,' he added.
Speaking at the event, Haware said the sector has digested the implementation of RERA, which has improved the industry.
'The industry has also come out of the impact of demonetisation. But if input credit tax in GST regime is provided to the building industry, it will solve many problems and the industry will start flourishing,' he said.
Haware, however, noted that the sector needs a financial stimulus package for survival.
'As many as 269 other industries are in one way or the other linked to the sector. Since real estate is the largest job provider after the agriculture sector, this industry has to survive,' he added. PTI IAS PSK ABM ABM