Forecasting further correction in the real estate market in the coming 12 to 24 months, an international expert on real estate said that India urgently needs a framework to govern the sector.
Making a presentation on Indian Real Estate Sector: Slumdog or Millionaire at an event hosted by the Observer Research Foundation, Sameer Nayar, managing director and head of real estate (Asia Pacific), Credit Suisse, said that land use laws in India are the most antiquated.
"Construction and real estate sector provide maximum employment in India after the agriculture sector. But still, there is no real, comprehensive policy in this sector. Nobody is focussed on this issue," Nayar lamented.
He said while there is so much hype about the information technology sector which provides less than a million jobs in a country of a billion people -- and over a 100 million working-age people -- the sector which provides the second largest employment is lying unnoticed.
Nayar said investors are talking about only China. They say India will have to wait, may be one or two more years, he said. "I can do a deal in China in 30 days. But in India, it takes at least six months," he said.
He said there is still a lot of demand in the real estate sector if the market can provide the right product -- middle market residential units costing between Rs 20 lakh and Rs 50 lakh (Rs 2-5 million).
"What we need is not five-star hotels or costly condominiums but middle market flats and low budget hotels," he said.
He noted that there is a huge disconnect between the supply and demand in the office space too, with an estimated supply of 50 per cent more office space.
Nayar said malls which are mushrooming will shut down soon. He disclosed that already experts are advising converting of malls into office spaces, etc.
Nayar defended the idea of Special Economic Zones, saying these have delivered splendidly in China. "But in India, as in everything else, the implementation of the policy was not right. That is what has created all the problems," he said.
He said there is a sort of standoff in the market, with both the seller and buyer not happy with the price. "So no transaction is taking place. This may continue for two more years," he predicted.
Nayar said that with over $6 billion flowing into India's real estate sector through FDI since 2005, there was a big distortion in the price.
"There was no right valuation. There was no control. And this drew all into the market, without any expertise and delivery records. Even a gutkawallah became a real estate player without any expertise, though the sector was a highly complex and competitive business which needed highly skilled manpower," he said.