Implementation of game-changing reforms such as RERA, Benami Transactions (Prohibition) Amendment Act, GST and demonetisation, one after another, attempts to address the core, systemic issues that persist in the sector for several decades.
Over the past couple of years, India has considerably enhanced the levels of transparency in the real estate sector. Thanks to the battery of massive reforms, the investor sentiment is improving consistently both at domestic and global levels. The face of India’s real estate sector is changing, and changing quite fast. Implementation of game-changing reforms such as Real Estate Regulatory Act (RERA), Benami Transactions (Prohibition) Amendment Act, Goods and Services Tax (GST) and demonetisation, one after another, attempts to address the core, systemic issues that persist in the sector for several decades.
Although it is bit early to gauge the impact of these overarching reforms which are meant to transform long-standing issues, the implementation in itself is a commendable step and the global investor community has taken this quite positively.
This is well-reflected in the capital inflows. Since 2014, Private Equity (PE) investments in the real estate sector have grown by around three folds. In 2017, the total PE investment was pegged at $6.3 billion, which was substantially higher than $2.2 billion registered in 2014.
India is the only economy in South Asia to join the list of the 10 top improvers in the World Bank’s “Doing Business 2018: Reforming to Create Jobs” study. This is the first time India has entered the ‘Top 100’ club, improving its global ranking to 100 from 130 recorded in the preceding year, and being the second largest employer in the country after agriculture, the construction industry has a central role in driving this change.
The liberalisation of the foreign direct investment into the realty sector, policy reforms, improved market fundamentals along with strengthening of information in the public domain were the main drivers. Alongside, industry status to affordable housing and digitisation of property records were other major drivers, according to the index.
Obtaining a building permit is made faster by implementing an online Single Window System for the approval of building plans; the new system allows for the submission and approval of building plans prior to requesting the building permit. India also strengthened access to credit by amending the rules on priority of secured creditors outside reorganization proceedings and adopting a new insolvency and bankruptcy code that introduced a reorganization procedure for corporate debtors.
There have been several research studies that corroborate the positive impact of improving levels of transparency in the sector. JLL’s Global Real Estate Transparency Index 2018 report, for instance, mentions India as one of the top 10 countries in the world to have shown considerable improvement in transparency in the real estate sector in the past couple of years.
On the taxation front, which is one of the key indicators of how well a country wants to keep its governance processes just and transparent, implementation of GST as a unified taxation system was yet another move meant to bring sweeping changes on the ground. Amidst the GST furore, some other major reforms got overshadowed. In 2016, for instance, the Income Computation and Disclosure Standards (ICDS) had been introduced to standardize the methods of computing taxable income and other tax accounting standards.
The impact of all such overarching reforms will be felt in times to come and 2020 could be the watershed year starting an all-new story of growth in the real estate sector in India.
(By Kanika Gupta Shori, Founder & COO, Square Yards)