Connect with us

Regulations

Reforms Transform Real Estate And Housing Sector

Published

on

Reforms transform real estate and housing sector

As Prime Minister Narendra Modi’s government marks three years in office, one area in which it can be proud of its reformist and progressive policy approach is the real estate and housing sector. 

Unregulated, unorganized and disoriented for years, it has emerged as a professional, mature and regulated sector thanks to a number of reforms and policy initiatives. 

These include the Real Estate Regulation Act ( RERA), liberalised FDI rules, Real Estate Investment Trusts (REITs), besides key missions like Housing for All, Smart Cities, AMRUT (Atal Mission for Rejuvenation and Urban Transformation), and, of course, the Goods and Services Tax (GST), a landmark reform. 

Together these have positioned the Indian real estate sector as an attractive global investment destination. 

Of these slew of reforms, the two game-changers are RERA and GST. 

RERA, which came into force on May 1, regulates the unorganized real estate sector with fair, transparent transactions that not just protect the interests of consumers but also boost the confidence of investors. 

The GST, set to be operational from July 1, aims to dismantle federal tax barriers in order to create a single, unified market with tax transparency and predictability, promoting ease of doing business and improving supply chain efficiency. 

All this, together with an accruing reduction in compliance costs and tax management expenses, and provision of Input Tax Credit (ITC), may well soften the overall impact of taxes on real estate. 

In the backdrop of massive urban shortage of about 20 million homes, the Modi government has come up with a Housing for All by 2022 Mission, with a clear focus on affordable, low-cost and EWS (economically weaker section) housing. 

The mission has gained momentum with a number of enabling policy initiatives and tax reforms, including 100 percent service tax exemption to affordable housing developers, infrastructure status to affordable housing to facilitate fund flows, hiked exemption limit on interest outgo on home loans, and credit-linked subsidy under the Pradhan Mantri Awas Yojana (PMAY). 

The government is giving no less importance to rural housing as the budgetary allocation under PMAY has been raised from Rs 15,000 crore to Rs 23,000 crore ($2.3 billion to $3.5 billion), with a target to complete 10 million homes by 2017-18. 

The Centre has undertaken significant mortgage reforms by way of a new broad-based Credit Linked Subsidy Scheme (CLSS) under PMAY to ensure that its benefits reach beyond the EWS and LIG (lower income group) segments, to the teeming middle classes. It has also introduced a Marginal Cost of Funds based Lending Rate (MCLR) for speedier transmission of Reserve Bank of India rate cuts to home buyers. 

The cumulative effect of these reforms, together with steps like the Benami Property Act, demonetization and restrictions on cash transactions to stamp out black money and check artificial price inflation, has been that owning a house today has become much more affordable for the masses as prices have fallen and interest rates are down. 

Thanks to these reforms, commercial real estate has already seen a turnaround and residential real estate is on the path to recovery. 

In the recent past, residential projects have shown a pick-up in demand and sales, registering an investment of over Rs 26,000 crore ($4 billion). According to a report by CLSA India, a $1.3 trillion housing boom is set to be the country’s next growth driver, adding 60 million new houses during the six years beyond 2018, and creating two million jobs annually. 

 

The government’s commitment to urban renewal is also reflected in policy initiatives like the Rs 1 lakh crore ($15.3 billion) Smart Cities Mission, the Rs 77,000 crore ($11.8 billion) AMRUT Mission that aims to provide basic services (water supply, sewerage, urban transport) to households, and creation of the Rs 4,000 crore ($610 million) National Investment and Infrastructure Fund. 

 

Over the last three years of the Modi government’s term, the funding for infrastructure development has almost doubled from the Rs 9,850 crore ($1.5 billion) per annum during the previous regime. The FDI-related reforms have also shown the desired results, with inflows touching a record $43.5 billion in FY 17. 

In real estate, there has been FDI of $5.7 billion and $32 billion of PE funding flowing into India, according to the 2016 World Investment Report prepared by the UN. 

The positive impact of the government’s policies and reforms is clearly visible in the over 50 percent increase in the BSE Realty Index this year, as well as the improving economy that is set to grow at about 7.5 percent — well on its path to becoming the fourth-largest ($3.5 trillion) economy in the world by 2022. 
Despite all these positive signs, there are challenges on the ground in term of successfully implementing RERA, GST, REITS, Housing for All, et al. Also, there is a big challenge in the form of new reforms like fixing the flawed Land Acquisition Act and introducing a Single Window system to promote ease of doing business — an area where India still lags behind at 130th place in the World Bank’s 2017 rankings. 

The twin challenge before the government over the next two years will be to execute its reforms and complete the unfinished agenda so as to ensure that its initiatives bring about transformational changes on the ground. 

Source: Economic Times

Also Read: “If Developers Fail To Get Registered Before End Of July, Show Cause Notices Will Be Issued”

 

Regulations

373 Maharashtra Cities To Fall Under PMAY Scheme

Published

on

By

The state of Maharashtra has added 232 cities to the existing 142 which makes it 373 cities under the Pradhan Mantri Awas Yojana Scheme (PMAY).

The officials at the housing department feel that this step will aid the government take up more projects under the PMAY scheme.

Sachin Kulkarni, Builder shared his concerns over the lack of coordination between the department in executing PMAY projects. He said, “This is a good sign. However, the PMO’s seriousness in promoting HFA is diluted by the time it reaches the authorities. Apart from collecting application from interested beneficiaries, nothing has moved on the ground in urban centres. I hope that this initiative moves on fast track”.

Maharashtra CM Devendra Fadnavis recently states that the in order to create more housing stock the state’s Slum Rehabilitation Authority scheme be brought under PMAY so that it can receive the subsidy to create more affordable housing. He clearly mentioned that the government intends to create more housing stock and it was taking various initiatives and making policy changes for it.

Also Read- Affordable Housing To Get A Boost With PMAY’s Scope To Be Extended To Private Lands

Continue Reading

Regulations

Real Estate Sector May Fall Under GST What Does It Mean For Buyers?

Published

on

By

One after the other the real estate sector has witnessed massive policy and law changes in its systems. Nonetheless, the tide has not passed yet. The GST council will take up a proposal to bring it under the uniform nationwide levy.

As the industry is still recovering from the RERA Act, the finance minister, Arun Jaitley said that there is a strong case to include real estate in the new indirect tax regime. He said this last week and also mentioned that GST Council will discuss it in November.

At present, the home buyers are paying 12 percent GST on under-construction properties. This percentage includes two taxes which are stamp duty and registration. The rate of which varies in each state but GST will make them uniform.

Santosh Dalvi, KPMG India partner (indirect tax) said, “If the entire real estate is brought under GST, they would have to abolish the stamp duty and we don’t know how the government plans to compensate the states for their loss.”

The stamp duty with registration and GST comes to approximately 18 percent for under construction properties. He further said, “So, it’s important to look at what rate it will be taxed at. We can then look at consumer prices”.

While agreeing, Bipin Sapra, EY partner (indirect tax), added, “It’s going to be a test for the government”.

Developers also pay taxes on raw materials. However, unlike other businesses, they don’t get any tax refunds through input credit. GST taxes every stage of the business activity to better compliance and compensates for it by permitting refunds.

Anuj Puri, Anarock Property Consultants chairman, said “By including real estate under GST, builders can get a fair amount of input credit, helping bring down costs,” He added that it would make homes cheaper for buyers.

According to Sapra, it will depend on the tax rate applicable.

Niranjan Hiranandani, co-founder of Hiranandani Group said, “Real estate under GST ambit means consumers will only have to pay one final tax.” He stated that with the commencement of RERA it brings transparency and GST would reduce the burden in terms of taxes payable while buying the home. He concluded, “Not only will this create positive sentiment but it should also boost actual sales”.

Also Read: Affordable Housing Is The Changing Face Of Indian Real Estate

Continue Reading

Regulations

Home Buyers Will Be Covered Against Builders Who Are Going Bankrupt

Published

on

By

In a move to protect home buyers from builders declaring their bankruptcy, the Insolvency & Bankruptcy Board of India (IBBI) has amended rules which make it necessary for any company to showcase how they have dealt with interests of all stakeholders. This is directed towards companies like Jaypee Infratech and some of the entities of Amrapali Group.

The regulator has informed about the revised rules last week. This will ensure that banks and other creditors do not get away by protecting their interests at the expense of others who are impacted by the action.  Banks are part of the creditors’ committee. They become an important decision-making body after a company is admitted for bankruptcy.

An expert bankruptcy lawyer said, “The change in the rules has plugged a gap as flat buyers are of the view that there is nothing to protect their interests.”

According to the new law that was enacted last year intends to speed up the resolution process in a period of 180 days, with a possible extension of 90 days. This will be done by appointing insolvency resolution professionals who will take charge of the company’s operations and prepare a plan. As per the law, an information memorandum will be finalized if the creditor’s committee is willing to take applications from other interested companies to take over the company.

The insolvency experts say that the law providing for the plan binds corporate debtor (the company) and its members, employees, guarantors, and creditors, other stakeholders involved in the resolution plan. However, there are no obligations mentioned in the rule to give any treatment to the stakeholders other than the financial creditors (banks) and operational creditors, which includes vendors and others who may have dues.

The National Company Law Tribunal, based on the comfort provided by the revised rules, will choose the final resolution plan based on bids that are received. The lawyer further said, “The tribunal will not clear the resolution plan without giving notice to all stakeholders and the flat buyers can raise objections at that point of time.”

Also Read: Tanvi Group Fail To Deliver Homes And Declare Bankruptcy

Continue Reading

Trending