Indian General Elections: Real-estate Rolls the Dice
The General Elections are scheduled for May 2019. The lobbying has started, the voices are out. Will the real estate sector benefit from the appeasing politics? Will 2019 be the year for the much awaited real estate reforms?
Text: Brij Pahwa
Real Estate is one of the many sectors that change their behaviour quite frequently depending on various events taking place in the financial, political and policy ecosystem. With general elections round the corner, we might see a shift in status quo of the industry (well, not really an industry) again. What would also see a new dawn is the industry of expectations – home buyers, developers, brokers; the list goes on. Everyone would expect the new government, (especially if it is a new one at the centre), to enlist new policies, rules and regulations that will benefit different factions. An incumbent government (if it comes again) would be expected to consolidate on its existing policies and bring relevant changes.
RERA- The Rebuilder
Hailed as a game changing policy, RERA was welcomed by the sector in positive light. The bill has improved the nature of the sector in terms of adding rules and regulations. More transparency has also helped the buyer make more informative decisions & raising their confidence in the sector. Let’s hope the new state governments will maintain the true spirit of RERA Act .
While the regulators bill has ensured much more transparency and more support to both the developer and the buyer, many believe a lot more can be done. A time limit for approval requests, for example, is something that will help the developers start the project on time and deliver the same within the stipulated limit. Nayan Shah – President CREDAI MCHI stated that the developers are further hoping the new government will implement section 32 ( b ) and ( c ) of RERA Act by which actions of approving authorities can be put under check. Hopefully, post elections we will see the government ensuring a balance of responsibilities among all stake holders in housing industry.
GST- The Game Changer
. Under GST, GST was implemented last year amidst a lot of government fanfare and has particularly benefited the homebuyers as various taxes are subsumed within GST that also offers benefit of input tax credit. the developers’ construction costs too are significantly reduced as multiple taxes are subsumed and due to the availability of input tax credit. Also, reduction in cost of logistics is an added benefit helping improving the margins.
The sector however is demanding lowering of 12% GST on under construction properties to help boost sales. The January 10, GST council meet which was expected to lower the GST rates in the sector failed to do so. Praveen Jain, President NAREDCO expressed his disappointment stating that the realtors are of the view that lower GST prices will help bring sales cost down, in turn helping the developers sell unsold inventories. This issue might see new light as and when the party manifestos are out. We expect that the General Elections 2019 will ensure much more efforts towards lowering the tax burden for the homebuyers. Also read http://realtyplusmag.com/breather-for-builders-and-buyers-budget-reactions-2019/
Industry Status – Real-estate Gain
In the Budget 2017 Finance Minister Arun Jaitley gave the affordable housing sector infrastructure status. The real estate players cheered the decision as it meant easier access to institutional credit, reducing developers’ cost of borrowing and simplified approval process for affordable projects. The full benefit of the policy decision is slow to come but it is hailed as the step in the right direction.
With various populist measures being taken to ensure a poll victory, giving industry status to the entire real estate sector is looking like a plausible possibility this election season. The developers have reiterated their age-old demand for industry status that would counter the cash crisis being faced by the sector as a whole. As Anuj Puri, Chairman Anarock rightly mentions “Real estate is one of the key GDP contributors and the fourth-largest employment generator in India. Extending industry status to the entire real estate sector will help developers to raise funds at lower rates and, in turn, reduce their project costs – which will help in pushing demand.”
Ease of Doing Business- At the Forefront
Year 2018 saw India’s rank in the World Bank’s Ease of Doing Business improved 65 places from 142nd in 2014 to 77th in 2018. Though real estate sector is yet to exploit this fruit bearing tree and see reforms in areas of land acquisition, land ownership and approvals among others, the sentiment is still positive across the sector. Samyak Jain, Director, Siddha Group from Kolkata is of the view out that the government’s several measures such as the grant of the infrastructure status, increased allocated expenditure, tax subsidies and GST has propelled India’s strong rank in the ‘Ease of Doing Business’ Survey by the World Bank.
Now, the expectations from the new government at the centre are improvement in areas such as Enforcing Contracts and Registering Property as well as other approvals related departments of realty sector.
Affordable Housing- The Shining Star
Affordable housing, backed by government CLSS schemes and other sops continues to be among the biggest sales driver. The year 2018 attracted many developers interest towards affordable housing because of the infrastructure status grant. Furthermore, the Ministry of Housing and Urban Affairs has set a target to sanction around 75 lakh houses till March 2019 under the Pradhan Mantri Awas Yojna (Urban PMAY) – a new to cheer by the realty developers. The industry insiders predict that over the next three years, at least, affordable housing will lead the race when compared to other categories. More so given the New Year gift by the Modi government of extended Credit Linked Subsidy Scheme for the Middle Income Group (CLSS for MIG) for first-time homebuyers till March 2020. Also read http://realtyplusmag.com/real-estate-sector-sees-budget-boosting-consumer-sentiment-2/
The real estate market witnessed a recovery of sorts in 2018 with at least 30 per cent growth in home sales. According to Ramesh Nair, CEO & Country Head, JLL India all cities have shown positive growth and he believes that the fence sitters have now come back to the market with flats becoming affordable. The upcoming general elections are expected to give a fillip to the affordable housing that will continue to drive sales.
The New Year has brought new hopes, expectations and promises. Post the general elections, the new government is expected to bring more transparency in the sector, accountability by all stakeholders, lowering taxes and positive policies boosting the second largest employer segment in India and also the one on which many ancillary sectors are dependent.