The real estate sector contributes significantly to India’s GDP and is the third largest employer, after agriculture. With urbanization being one of the major growth drivers for the sector, the real estate sector is likely to get a further boost from with plans like Housing for All by 2022, Pradhan Mantri Awas Yojana (PMAY), 100 smart cities, etc.
The sector has been able to garner the government’s attention through the announcement of supporting measures to revive real estate sector over the past years through key policy reforms such as introduction of GST and the Real Estate (Regulation and Development) Act (RERA), which did create a lot of stir amongst the developer community and consumers alike. However, 2018 will be a year which is likely to see boost in consumer sentiment with these policy introductions. After demonetisation, RERA will help realise the ‘Housing for All’ initiative by the government, and the seamless implementation of Goods and Services Tax (GST) will further consolidate the real estate segment in India.
Any industry that adapts to change grows faster. The regulatory and tax reforms are seen to provide strength to the real estate sector, organising the business in a more standard system. The real estate industry has always been ready for new and progressive policy introductions and the triple effects of demonetization, RERA and GST have played a major role in setting up new benchmarks of delivery, accountability and transparency for the sector. We see these factors to be instrumental in enabling a tectonic shift in how India will see future housing. Initially, GST saw some teething problems with regard to its implementation, but the reform brought all indirect taxes under one unified tax structure; leading to facilitation of seamless movement of goods across the country.
Likewise, we look forward for RERA to bring in more transparency in dealings, mandatory timelines, risk-free mechanism to protect the interest of the buyers and fair play. However, how these policies are enforced determines their future and also of the nation at large. RERA post its implementation is looked upon as ensuring formalization of the Indian real estate sector with required transparency and strengthening the relationship between consumer and developer. GST on the other hand will be a benefactor for the real estate regime in the long run with the intention to replace multiple levels of taxation primarily in light of the expected free flow of credit.
With the consolidation of these policies, established players in the market will grow in strength, edging out smaller developers in the process, which will bring in better planning, pricing and better execution and timely delivery. Naturally, these will also bolster the confidence of potential customers who are looking to invest in real estate.
We are also anticipating GST and RERA to slowly have their impact on pricing of homes, where we will see an increase in price by an average of 7%. While RERA and GST are a step towards progressive change, we should also look at the tax rates and incentives that would contribute more towards nation building. Technological is an important factor in the implementation of these policies. Technology is an enabler, which will help the regulatory enforcement system of the country speed up project delivery; thereby bringing down the cost of owning a home significantly in addition to weeding out corruption in the sector. Today, only 0.5 % of technology is used in the realm of real estate and home building, whereas it holds the potential of accelerating efficiency leading to growth. Hence, unless we bring in technological integration with our regular working models and make sure that there is lesser human interface, we will not be able to see much larger growth, not only in the housing segment but also towards larger contribution towards nation building.
(By M Murali, Managing Director, Shriram Properties)