Interest rates hurting realty market: KP Singh

Hindustan Times | ByNarayanan Madhavan, New Delhi
Sep 18, 2007 07:59 PM IST

Real estate industry leader KP Singh says urban infrastructure was the next big industry – if only governments would boost PPP, reports Narayanan Madhavan.

Moaning about high mortgage interest rates and low floor space index (FSI) regulations that check high-rise buildings in key metros, real estate industry leader Kushal Pal Singh said on Tuesday that urban infrastructure was the next big industry – if only governments would boost public private partnerships (PPP).

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HT Image

The DLF chairman told a news conference after releasing an industry study by business chamber Assocham that water supply lines, sewerage systems and roads wide enough to bear growing traffic were among constraints to his industry's growth, while a banking squeeze on home loan rates posed obstacles to releasing pent-up demand.

The Assocham study said that a rise in interest rates from about 7 per cent to 12 per cent over the past few years had resulted in a rise of Rs 3,250 in the equated monthly instalment (EMI) payment for every Rs 10 lakh of home loans taken eroding the affordability of homes.

Every one percentage point rise in GDP gave rise to an urban infrastructure demand about 2.5 times that, implying that a 10 per cent GDP growth would boost urban infrastructure needs by 25 per cent, with matching needs for resources and services.

"Urban infrastructure is a sunrise industry for India," Singh said. "You have to see the dimensions of the issue. Even in elections, the state of infrastructure (in cities) will become a focal point," Singh said.

He said the government could become an "enabler, regulator and facilitator" for urban infrastructure while leaving development work to private realtors to build facilities. While smaller "Tier II" cities were growing to keep up with the demand, "Tier I" cities will "always grow faster", he said.

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