The real estate sector holds a crucial position in any nation’s economy, its influence extending from employment creation to overall economic growth. However, this sector’s dynamics are intricately tied to various factors, notably policy and regulatory alterations. Governments, over the years, have initiated regulatory reforms to streamline the real estate industry, aiming for heightened transparency, stakeholder protection, and economic advancement. Predictions indicate that by 2030, India is set to rise as the world’s third-largest real estate market, reaching an impressive value of USD 1 trillion. This constitutes a significant chunk, about 18-20 percent, of India’s GDP.

The real estate sector has already positioned itself as a formidable contributor to the country’s Gross Domestic Product (GDP), underscoring its pivotal role in the economic landscape. Forecasts paint an encouraging picture, indicating that by 2025, this sector might constitute a substantial 10-13 percent of India’s GDP. With its current growth momentum, it’s quite plausible that it could surpass the remarkable milestone of $1 trillion in market value by 2030. These forecasts accentuate the indispensable role the real estate sector plays in fortifying the nation’s economic vitality.

RERA: Building trust brick by brick

One of the most significant regulatory changes in recent years has been the introduction of RERA. This act aims to bring transparency, accountability, and efficiency to the real estate sector. It mandates the registration of real estate projects and real estate agents, ensuring adherence to project timelines, quality, and fair practices. The implementation of RERA has boosted consumer confidence, leading to increased investments in the real estate sector.

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GST implementation

The implementation of Goods and Services Tax (GST) in India has simplified the tax structure applicable to the real estate sector. It has subsumed various indirect taxes, leading to a more streamlined tax regime. Although initially, it faced challenges, especially in the residential segment due to high GST rates, it has ultimately facilitated transparency and reduced tax evasion, positively impacting the economy. Developers now face a 15 percent service tax under the GST and RERA regime, but they have witnessed a reduction in multiple taxes and an improved overall scenario. Conversely, for buyers, the advent of GST and RERA has enhanced transparency and streamlined real estate investments.

Affordable housing benefits

To promote affordable housing, the government introduced various incentives such as tax benefits, interest subventions, and infrastructure status to this segment. These incentives have encouraged developers to focus on affordable housing projects, addressing the housing needs of the masses. The affordable housing push has not only boosted the real estate sector but also positively impacted economic growth.

Benami Transactions Act: Boosting Transparency

The Benami Transactions (Prohibition) Act was enacted to curb black money and undisclosed properties. It prohibits benami transactions and empowers authorities to confiscate benami properties. This has encouraged transparency and discouraged illegal practices in real estate transactions, contributing to the overall economic integrity.

Digitization and e-governance

The digitization of land records and the move towards e-governance in various states have significantly reduced property disputes, frauds, and corruption. Digital platforms for property registrations and transactions have made processes more efficient and transparent. This has not only benefitted buyers and sellers but has also enhanced the image of the real estate sector, attracting more investments.

Environmental regulations

Incorporating environmental regulations in real estate development has become a norm. Green building certifications like Leadership in Energy and Environmental Design (LEED), Green Rating for Integrated Habitat Assessment (GRIHA), etc., are increasingly sought after. A Knight Frank India survey highlighted that from January to October 2022, LEED-certified buildings in seven cities reached 39.59 million sq. ft. Delhi-NCR, with 9.85 million sq. ft., had the highest gross floor area of LEED certified buildings among the top 7 Indian cities in this period. Governments are imposing stricter environmental norms to ensure sustainable and eco-friendly construction practices. This has elevated the profile of the real estate sector, making it more attractive for both domestic and foreign investments.

FDI liberalisation

The liberalization of FDI norms in the real estate sector has encouraged foreign investors to invest in Indian real estate projects. This has not only infused capital into the sector but has also brought in international best practices and advanced technologies, boosting the overall growth of the industry. India’s real estate sector experienced a remarkable surge in foreign institutional inflows, totalling $26.6 billion from 2017 to 2022, as per a report by Colliers, a real estate services firm. This substantial growth is attributed to profound structural and policy reforms, fostering transparency and facilitating smoother operations within the sector.

Put simply, regulatory changes in the real estate sector have substantially influenced its dynamics, bringing in transparency, accountability, and efficiency. These changes have not only protected the interests of consumers and stakeholders but have also bolstered the economy. A well-regulated real estate sector ensures a level playing field for all stakeholders and contributes significantly to a nation’s economic development. Therefore, it is imperative for policymakers and industry players to work collaboratively to create a conducive regulatory environment that fosters sustainable growth and prosperity.

(By Venkat Rao, Founder-Intygrat Law, a corporate business advisory company and law firm. Views are personal)