The positive impact of reforms in reducing regulatory hurdles ... is clearly visible from the GRETI 2016
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The government’s proposed move to make linking Aadhaar (unique identification number) with property deals mandatory, is a logical extension of its crackdown on black money to bring in greater transparency into the real estate market.
As per the broad contours of the plan, the government plans to make Aadhaar- based authentication mandatory at the time of registration, sale, purchase and transfer of property. Once properties get linked with Aadhaar at the national level, it will become easier for the government to clearly identify the ownership of each property and in the process, stamp out fictitious (benami) properties.
The Benami Transactions Act has come in handy in cracking down on suspicious real estate deals, involving unaccounted money. Following demonetisation, the tax authorities have ascertained that 95 per cent of all unaccounted money is invested in physical assets like real estate and gold. Over 600 properties worth more than Rs 1,800 crore have already been attached as benami transactions.
A number of far-reaching reforms by the government in the real estate domain, has had the desired impact and helped usher in the transparency that was much-needed. Demonetisation has helped boost digital transactions, which in turn have helped check the bane of the real estate sector - illicit deals involving unaccounted cash. The government’s incentive policy of encouraging digital transactions/payments along with the curbs on cash transactions, have also had good results. The landmark tax reform – the GST – has not just improved the ease of doing business, but also brought in more transparency. The GST sops for digital payments, now under consideration, should be an added boon.
The much-awaited reform of regulating the real estate sector through the Real Estate Regulation Act (RERA), has helped bring in accountability, credibility, fair play and transparency in transactions with key provisions like mandatory disclosures by property developers, maintaining a separate escrow account for each project, ban on pre-launches (involving black money transactions) and selling on the basis of the carpet area of a property.
As property titling certification is a key to transparent real estate transactions. As part of its reforms, the central government, has made property titling mandatory under the JNNURM and called upon states to create an enabling framework for secured titles to ensure fair transactions. The digitisation of property records will, moreover, help property buyers access the records online and verify the ownership of a property before making a transaction.
The government’s consistent efforts to bring transparency into the economy in general and the real estate sector in particular, have given a boost to the confidence of foreign investors. This is clearly reflected in global capital outflows of $5.7 billion in 2016 and PE investments in real estate topping $3.2 billion between January and September 2017.
The positive impact of reforms in reducing regulatory hurdles, initiated by the government, is also clearly visible from the Jones Lang LaSalle Global Real Estate Transparency Index (GRETI) 2016. According to it, India has improved its overall transparency score across all markets, with tier-1, tier-2 and tier-3 cities securing the 36th, 39th and 52nd position, respectively. This is the result of pro active policy measures related to land (digitisation of land records and enactment of the progressive Land Acquisition Act), liberalisation of FDI norms and strengthening of information in public domain. Going forward, as RERA settles in and its effect is more visible, JLL expects a significant jump in the transparency ratings in the next transparency index-GRETI 2018.
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