Narendra Modi-led NDA government, which is completing two years on Thursday, has taken reform measures and initiatives in the past to boost different sectors, including real estate.
Economic growth in India has rebounded since Modi government came to power, signalling an improvement in business sentiment. However, many experts believe economic activity should show more uptick for the real estate sector to rebound.
“Real Estate sector in short-term will see a lot of pain. At least for a year or two, no big change is expected because of GDP growth. The government would need to take more policy moves in terms of passage of GST and removal of corruption that will have long-term impact on the sector,” Gulam Zia, executive director – Advisory, retail and hospitality, Knight Frank (India) said.
In recent past, the passing of the long-pending Real Estate Regulatory Bill was seen as a great victory for India’s real estate sector and has got a thumbs up from almost all experts. The move will reinstate buyers’ confidence in the real estate sector.
The Modi government also launched 100 Smart Cities Mission, along with Housing for All by 2022, Affordable Housing and Atal Mission for Rejuvenation and Urban Transformation (AMRUT). Along with that the government relaxed the FDI policy for the real estate sector and announced easing of approvals process for realty projects.
With the passage of Real Estate Regulatory Bill, government has also warned the developers with strictest possible action if they take consumers for a ride.
Ankur Dhawan, chief business officer, Proptiger says,”The passing of the Real Estate Regulatory Bill and steps towards Affordable Housing are the two moves taken by the NDA government to boost the realty market and bring in transparency for the buyers. The government has taken multiple steps to make affordable housing a reality.”
One of the key policy announcements in the 2nd year of Modi govt was 100 per cent FDI in eCommmerce that is seen as step which will have significant impact on the real estate sector.
Anuj Puri, chairman and country head, JLL India said, “The move will require large office spaces to house their back-end teams. This will create a demand for warehousing and logistics real estate. Unlike the demand for office spaces, this additional requirement will be spread fairly evenly across Indian cities. We see a significant step-up in demand for warehousing spaces in and around these cities.”
Knight Frank India’s Zia added that exempting REIT from Dividend Distribution Tax (DDT) in Budget 2016-17 was another important step from the government. The move will pave way for successful listing of REITs in India.
Despite the government having done a lot to revive the sector, real experts believe it can provide further boost by focusing on infrastructure development in terms of road and power supply.
Dhawan said, “The concept of Smart Cities will get a boost if the government focused more on road and power infrastructure. A home-buyer looks for better infrastructure amenities while looking for a perfect house.”
Zia added to this and said, “the sector will get a boost if GST Bill gets approved and implemented.”
GST Bill could replace multiple taxes (service tax, VAT etc) when purchasing flats. Currently, home buyers are liable to pay multiple taxes on purchase of under-construction properties.
In addition to the Stamp Duty and Registration Charges, other taxes such as Service Tax, VAT, Excise Duty, Custom Duty and Entry Tax, among others, are levied on home buyers. This combines to form about 22-25 per cent of the total cost of the unit which is against the theme of government’s affordable housing.