Welcome address by Mr R S Lodha, President-elect, FICCI

Respected Shri Ananth Kumar ji, Hon'ble Minister for Urban Development & Poverty Alleviation,
Shri Bandaru Dattatraya, Hon'ble Minister of State for Urban Development & Poverty Alleviation,
Shri Deepak Parekh, Chairman, HDFC,
Shri V Suresh, Chairman, HUDCO,
Shri Niranjan Hiranandani, Chairman, FICCI Housing & Urban
Development Committee,
Distinguished Speakers, Ladies & Gentlemen,

A very warm welcome to you all.

It is our privilege to have Shri Ananth Kumar ji with us to today and we are grateful that he has made time despite his extremely busy schedule and engagements in the Parliament winter session that begins today. Your address and vision for the housing industry will provide a clear direction to the deliberations of this Conference. We are also grateful to Shri Bandaru Dattatraya ji for being here with us today.

My sincere thanks to Mr Deepak Parekh for coining all the way from Mumbai for this event and making it so special. My thanks to all the other eminent personalities who are here today to enlighten us with their experiences and rich knowledge.

We all know that housing has been chosen one of the thrust areas by Prime Minister Shri Vajpayee ji and we are pleased that the government has given a lot of focus to this sector. However, despite many initiatives taken by the Government the agenda in housing remains daunting as the shelter gap has continued to increase. We need to address the institutional and regulatory aspects, as well as strengthen and expand the capacity of financing institutions. Recent budgets have accorded tax benefits to the housing sector, which has provided some impetus to this segment. However, given the large unmet demand for housing, there is a need for doing a lot more.

Let me briefly highlight some of the key issues in the housing sector.

In spite of the growth of the housing finance market, financing through the formal system account for only about 20-25% of housing investment in India. The remaining 75-80% is contributed largely by the informal sector. The formal sector, which provides finance at a lower cost, needs to be strengthened so that the consumers can shift from informal to formal sector.

The lack of adequate long-term funds poses asset-liability mismatch problems for housing finance companies. In developed countries Real Estate Mutual Funds, Pension funds and Insurance companies are major investors in the housing sector, and they supply long-term finance. Perhaps the Hon'ble Minister could share with us some initiatives his Ministry may be considering to augment the supply of long term finance to housing finance companies.

The focus of housing finance companies continues to be in the individual loan segment. Developers and corporate sector have been low in their priority list. We hope that both financiers and developers who are present in this conference will provide some solutions.

The development of a secondary market for real estate through the securitisation route has now become possible because of the recent amendment in the National Housing Bank Act allowing speedy foreclosure. This is a step forward towards developing a secondary market for mortgage instruments. We expect that in India, securitisation will help in mobilising large volumes of funds at relatively lower costs by effectively integrating the housing sector with the capital market.

But an effective mortgage market would not go very far unless some policy barriers are dismantled first.

First, for an effective securitisation market the existing stamp duties should be rationalised. The wide variation in stamp duties has restricted uniform growth of the housing finance market across the country.

Second, there is a need to revamp the archaic and outmoded legislative framework that is inhibiting development. The Centre has repealed the Urban Land Ceiling and Regulation Act (ULCRA). However, only few States have adopted this so far and tangible benefits are yet to accrue.

Third, the Model Rent Law enacted by the government needs to be followed by all States.

Fourth, the existing land records needs to be modernised and the land revenue laws should be amended for speedy clearances for taking up housing projects.

Since, housing is a State subject we would request the minister to share with us his thinking on how the central government can motivate the States on implementing reforms.

The government has announced 100% FDI for development of townships including housing and associated urban infrastructure. The industry has welcomed this move and is eagerly looking forward to the announcement of guidelines
allowing FDI in real estate sector. We hope that the Hon'ble Minister would throw some light on these guidelines.

I am sure today's deliberations would help us understand the intricacies and complexities of the key issues and provide a clear and concrete road map towards stimulating the Housing and urban development sector.

Thank you.