Future Reforms in Indian Real Estate
By Evente Clinic
The Indian real estate industry is looking promising after a lot of reforms introduced by Modi government in its first tenure. With clear majority and mandate, the Modi government will strengthen all the sectors especially Real Estate.
Indian real estate is already undergoing a revival, as transaction volumes have picked up Y-o-Y to the tune to 45-60 percent in major Indian cities. A strong mandate will further instill confidence in the sector and contribute to building momentum.
We can expect a lot of reforms in the coming years in the real estate sector.
The RERA has been going good and now the government will try and streamline it further. A faster window will help in rationalizing the cost of development and make real estate more affordable.
One important discussion going for some time is on the taxes imposed on buying the property. The home buyers have to pay for the stamp duty as well as the GST. We should expect some reform where both the cost will be merged. This will give a further push to the industry by easing out the cost of development.
“A faster window will help in rationalizing the cost of development and make real estate more affordable.“
We can expect some more reforms around affordable housing. It is the government’s dream, ‘Housing for all’ by 2022 and they will surely push for it harder after getting the second term. Providing big-ticket opportunities to both the developers as well as the investors in the coming year, affordable housing segment that was anointed with the infrastructure status in the Union Budget 2017-18, it is expected to grow at a high rate.
The PMAY which was originally scheduled to be ended by December 2017 has now been extended till March 2022 and includes the middle-class income group as well for the benefit of interest subsidy on home loans. Under the scheme, the carpet area of homes has been increased to provide for more interest subsidy by the Cabinet. An interest subsidy of 6.5 percent can be availed for a period of 20 years or during the tenure of a loan, whichever is lower by the low-income groups or economically weaker sections of the society.
The new government should emphasize on re-energizing the reforms related to infrastructure investment and land acquisition reforms. The government should take measures to expedite and streamline the environment clearances for the new projects, which is a two-stage process and takes two-to-three years. If single window clearance comes into effect then the timely delivery will improve and it will act as one more step in regularising the real estate sector, as approvals and more so timely approvals and simultaneously development of infrastructure around projects are an integral part of real estate development, more simplification of processes, accountability, and efficiency on timely approval from relevant Government authority is must for industry to accelerate the pace of development and bring back demand in the sector .
The government should allow banks and HFCs to fund land purchase to help developers bring down the cost significantly, which in turn can be passed on to the buyers. In the absence of bank finance, developers resort to PE funding and other non-formal modes of funding to finance its land purchase which increases the cost of capital for them drastically.
With all these reforms expected from the present government, the Indian real estate industry looks to accelerate in times to come. Isn’t it best time to purchase the property?