It’s been two years since Narendra Modi-led NDA made its way to form the government with a thumping victory in the year 2014 general elections. With a promise to bring ‘Achchhe Din’, the NDA infused great hopes amongst the Indians here in the country as well as Diasporas living abroad. No doubt, it was the anti-incumbency which threw the UPA out of the government. The economy was almost stagnant; Rupee slid to almost 70 per USD, unemployment was rising, foreign investors started shying away. Overall, the country was in bad shape. The series of scams by UPA ministers and party men played the cherry to the cake. Yes, it was time for the change. Yes, the citizens needed fresh air to breathe. It’s been two years now, and the question is did we get that change! Or it is yet to come in the remaining three years of NDA’s tenure.
Infrastructure is one of the key pillars to the economy and an indicator of the development and real estate is one of the most important ingredients to infrastructure. Needless to say that real estate has been reeling under slowdown since last three years; developers are struggling to sell their projects. It needed reformatory measures to bail itself out of this situation. However, in last two-quarters the sentiments have improved and buyers are returning to the markets and it appears that it will regain its lost glory in a couple of quarters. Is it the impact of fiscal and monetary reforms that NDA government announced in last two years!
Let’s analyze major development happened in real estate sector by Modi-led NDA in last two years:
This is one of the greatest achievements of NDA government. Pending since long, the Bill had provisions to streamline real estate transaction activities, approval mechanism and restriction to fraudulent activities. With its conversion into a law, this has boosted sentiments; buyers are now feeling safe, developers can now expect lesser time in approvals. Overall a significant development, it is capable enough to bring real estate back on track. But, a timely regulatory check will be required further to ensure the efficiency and proper execution of the norms created under RERA.
Again, initiatives well thought off and hitting the pain points of the commoners as well as investors. The government has so far announced 33 cities to be converted into Smart Cities. Many foreign investors have already given their consent to develop them by investing millions of dollars. Similarly, the government has given due emphasis of affordable housing and announced remarkable reforms to promote it. These announcements have already started showing results. But, it is also to be noticed that only tagging cities as “Smart Cities” will not suffice the purpose. The infrastructure and other developmental plan should also be in sync.
- Relaxation of FDI policies in real estate and construction sector:
Another remarkable achievement of NDA government, the reform aimed at solving the fund crunch in real estate. Rules for FDI in real estate has been relaxed and made investor-friendly. With the removal of lock-in period and project size clauses, affordable housing projects too can seek FDI. But, in addition of promoting the FDI, the guidelines should be created as such so that Indian Companies and customers are benefitted well.
- 100 per cent FDI allowed in eCommerce:
With the boom in eCommerce sector, allowing 100% FDI will further boost the expansion; an initiative to benefit the real estate sector directly. eCommerce companies require large offices and warehouses to support their backend teams. But, there can be such guidelines wherein the foreign ecommerce companies are asked to invest some part of their profits in India only rather than allowing them to take full profit to their respective countries.
- Exempting REIT from Dividend Distribution Tax (DDT):
This move will ease out ways for successful listings of REITs in India. REITs of the Real Estate Investment Trusts are types of security that invest in real estate through property or mortgages and often trades on major exchanges. But, the only check required is that the retails customers should not be allowed to create a bubble which has already been created in the residential domain by big investors. Since, due to trading of residential sector property the prices have gone so high that the sluggish market is still struggling to overcome.
Arguably, the number of initiatives taken by the NDA government in real estate sector in last two years surpasses all the developments done by both UPA1&2. Though NDA government took many initiatives to revive real estate, the full-fledged outcome will take some time. Moreover, the success of Real Estate Regulatory Authority, Smart Cities, and Affordable Housing to some extent will depend on the future of GST Bill. GST Bill could replace multiple taxes like service tax, VAT etc. when purchasing flats. Home buyers are liable to pay multiple taxes on the purchase of under-construction properties. These taxes include Stamp Duty and Registration Charges, Service Tax, VAT, Excise Duty, Customs Duty and Entry Tax. This combines to form about 22-25 per cent of the total cost of the unit. With GST in place, all these taxes would be brought under one roof. That would also promote the theme of affordable housing. The government should look out the ways to pass GST Bill at earliest.
Overall, these two years can safely be marked successful from industry’s point of view. The results will be more prominent in days to come. Hope the government passes the GST Bill and brings uniformity in business across India. The next three years shall thus be remarkable for the country, economy and the real estate sector in particular.