Given the current economic scenario in the country, which earlier was undergoing a slowdown and now has been hit by the COVID -19 pandemic, both the government and the RBI have done much to provide adequate support to the sector. From launching the Alternative Investment Fund (AIF) to giving last-mile funding to stuck projects, to introducing various measures offering succour to both developers and buyers, this proactive approach has been hailed by all, across sectors.
However, the effects of these steps will only become clearer once we gain clarity of the degree of damage the pandemic has inflicted. In the meanwhile, apart from reducing circle rates and increasing tax benefits for first-home buyers, here are the 5 things the government should further do to help the realty sector recover:
1. Industry status – At the outset, endowing real estate with the industry status can go a long way in reviving the sector. “For a sector that plays such a vital and important role in the nation building process and is considered as a key contributor to the growth of the economy, it has been denied the status far too long. Another fact to be considered is the sector offers employment to a sizable chunk of the population. This recognition will only help in making the sector more organized, transparent and regulated. It will also enable developers to cut capital cost and pass on the benefit to the buyers,” says Nimish Gupta, MD, RICS South Asia.
2. Single-window clearance – The real estate sector is still facing a lot of struggle in terms of liaisoning with multiple government agencies for project approvals. The single window clearance for projects remains a distant dream – with too much of red tape causing unnecessary delay. The to and fro done in order to procure various approvals, from land acquisition to starting construction, impacts timelines of both project completion and delivery. It is high time that real estate is given a single window clearance facility to make the project implementation faster and seamless. This will help the sector circumvent wastage of time, money and resources.
3. Alternative real estate modelling – The government should implement measures that encourage developers to look at rentals or other operating mechanisms for a regular accrued income, not just at capital sales approach. Alternative real estate asset modelling, from capital sale purchase to rental housing models, should be boosted. Moreover, “the present prevailing conditions of uncertainty have brought focus on rental housing. From the buyer’s perspective, it makes sense to opt for rental accommodation rather than purchase a house. Even post COVID-19, millennials will prefer to stay in rented spaces as the generation avoids being tied down and seeks varied experiences. The government can also create mechanisms to aid developers in utilizing vacant land parcels owned by it, through PPP,” informs Gupta.
4. Technology adoption – Technology can prove to be beneficial for the revival of the sector. The pandemic forced the government to look at alternatives for minimizing the risk posed to the economy and technology rose to tackle this challenge. Proptech, digital construction, precast technology, 3D printing, prefabricated technology are all innovations that can be leveraged to derive growth and prosperity for the sector in the ‘new normal’. The government has launched the initiative ‘Digital India’ but this needs to work in tandem with policies designed to facilitate technology exchange. Developers who promote the use of technology should also be given attractive subsidies or tax exemptions.
5. Financial measures – Lack of liquidity is a huge challenge for developers. Lowering of income tax can act as a boost to the sector as it will lead to reduction of financial burden on the buyers and increase their disposable income. “The government can also look at a one-time roll over of credit limit along with 50 per cent reduction in GST rates to bolster developers. The liquidity crunch being faced by the sector can be alleviated by the release of tax refunds, pending with the government. The abolition of stamp duty or its incorporation under GST will also aid the sector towards this end,” says Gupta.