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2017: The Year Gone By
Government's initiatives to make 'Housing for all by 2022' a reality will promote the growth of the housing sector, create employment opportunities and address the housing needs of millions
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The realty sector, both residential and commercial, has witnessed a slew of landmark government policies in the past year that have helped the industry to be more organized. Key announcements in the realty sector in 2017 which includes Affordable Housing, RERA, GST, bi-monthly RBI policies have proven to be a game changer for the real estate sector and have improved the overall market sentiment, reinforced investors' confidence, infused transparency and brought in the much-needed credibility. Furthermore, the festive season also catalyzed a surge in sales in the housing sector owing to the improved market sentiment. The realty sector witnessed some ambiguity post demonetization in November 2017. The decision to scrap old currency notes caused a minimal impact on sales however this helped in curbing many inconsistencies and unfair trade practices bringing professionalism in the sector. Reputed builders did not feel the pinch as they have been making use of bank channels for transactions.
Post the demonetization move in 2016, the government took staunch measures to provide relief and boost the realty sector in 2017. The union budget 2017-18 saw the government granting the infrastructure status to the affordable housing sector which would provide incentives to developers to construct budget homes and make housing for all a reality. Developers stand to get access to institutional funding and land in prime locations reserved for such projects. In line to boost the realty sector, the government reduced the holding period for computing long-term capital gains from transfer of immovable property from 3 years to 2 years. The government also paved the way for ease of doing business by announcing that construction permits would be issued in 60 days. Furthermore, the government implemented RERA and GST, two landmark reforms that would change the face of the industry.
Post the implementation of RERA, there has been increased transparency and accountability in the sector which has further reinforced investor confidence. With RERA coming into the picture, fly by night operators have faced an existential challenge. However, reputed and credible developers are not impacted by the Act, as this has been a standard operating procedure for them.
With respect to taxation, the Goods and Service Tax Bill (GST) has brought in uniform taxation to create a 'one nation one tax'. GST has created a level playing field for all the industry players allowing only the ethical ones to prevail. The bill is expected to result in higher transparency in the sector, which is currently facing a perception issue. However, there are talks to bring all real estate transactions under GST. The final decision is slated to be taken in the GST council meet on 9th November 2017. Currently, 12 percent GST is charged on the construction of a complex, building, civil structure or intended for sale to a buyer, either wholly or partly. On the other hand, land and other immovable property have been kept exempted from the GST. The rate of stamp duty varies from state to state and is in the range of 3-10 percent. The real estate industry is requesting the Government through various bodies to reduce the GST slab on housing to 5% as opposed to the current 12% which will eventually benefit the end consumer and boost the growth of the sector making it more transparent and organized.
The festive season of 2017 which commenced from Ganesh Chaturthi saw a slight surge in the sales in the housing sector. Customers, especially first-time homebuyers who were fence sitting in anticipation of some changes were looking to invest in homes. The market sentiment during the festival period was positive as it is considered as an auspicious time to buy a home. To add to it the developers too had various offers and discounts during this period.
The RBI has taken staunch measures to boost the realty sector complementing the central government's initiatives. The current repo rate of 6% has been the lowest so far which has helped to significantly boost the sector and ease the financial burden of millions of homebuyers.
The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform which will allow investors to invest in the Indian realty industry. This would help increase the cash flow in the sector and create opportunities worth billions over the years. The first REITs listing is expected in early 2018 which will provide a significant boost to the commercial realty sector and position the Indian Realty Market as an attractive investment option.
2018 - Sector Outlook
With the government encouraging foreign and domestic investors by implementing various progressive policy reforms, it has contributed to changing the modus operandi of the sector. Moreover, the government's initiatives to make 'Housing for all by 2022' a reality will promote the growth of the housing sector, create employment opportunities and address the housing needs of millions.
The state governments are also taking measures to develop the infrastructure such as new metro lines, road connectivity, flyovers, coastal roads, sea links, etc to support the government's initiatives to promote the sector. These reforms have had a cumulative effect on the sector and positioned it as an attractive investment hub globally. With the Indian economy set to grow and the country playing an important role in the world, the future of the realty industry looks bullish. These reforms and other developments have resulted in higher transparency, efficiency and accountability in the sector while protecting the interests of the buyers and developers alike.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.