As the real estate sector witnesses a sharp drop in inventory amid a rise in demand, the need of the hour is faster approvals for constructions, Irfan Razack, Managing Director of Prestige Estates Projects, pointed out on Monday.

Share Market Live

NSE

Real estate demand has risen post the third wave of the COVID-19 pandemic leading to most companies seeing quick inventory clearance.

According to a report by Magicbricks titled PropIndex Report, the pan-India housing demand has risen by 4.6 percent quarter-on-quarter and 6.7 percent year-on-year for Q1 2022.

However, the gross value of the output of construction for dwellings has fallen by 5.5 percent points even as inventory reduced amid strong demand, according to CNBC-TV18's guest editor and Credit Suisse's Neelkanth Mishra.

The rise in demand in real estate at a time when inflation is touching multi-year highs makes a case for better 'Ease of Doing Business' measures in the form of faster approval, said Razack.

"If in case we need to continue building and doing it fast, there also has to be a faster process of approvals. The government is working hard on ease of doing business (EODB)... If I have to come up with new launches and new offerings for my customers, the only way that can happen is if the approval process speeds up," he said.

The real estate sector adds to the Indian GDP (gross domestic product) only when new construction takes place and input costs have spiked 12 to 15 percent in the fiscal year gone by, a report by Credit Suisse noted.

As per a Motilal Oswal report, construction costs are 25-40 percent of the overall sales price in real estate and thus a spike in the former can be a dampener for the sector as a whole.

However, CS says construction may see a boost as the steel prices are expected to fall further as prices of iron ore and coking coal, key raw materials used in the production of steel, have fallen sharply.

Mohit Malhotra, MD at Godrej Properties, believes the demand is going to be consolidated by a few quality players.

"If I see our own company, we have been spending a lot more on construction every year periodically. I think the overall numbers for the industry itself are now going to start growing, especially since new launches have picked up. But this is going to be a place where demand is going to be consolidated by a few quality players... I think the one thing which will be good would be that the supply would be much more disciplined. And that kind of is critical for the long-term success of this industry." said Malhotra.

Watch the video for the full discussion, where the industry captains also shed light on if the IT sector salary boom is driving the rates in the top six cities of the country.