From the time when the current Government was sworn in power, the country witnessed numerous strategies that create an excellent platform for the financial and public demographics of India. Major schemes like, Housing for all, Digital India, Make in India, have been creating buzz for a long time and a complete action plan for execution of the policies and creating a friendly environment for the brewing of prospects was unwrapped in the Union Budget 2016.
Very big names not only in the field of real estate but also from the other industries have appreciated these schemes with a hope that it will bring the market back on track and lift up the GDP in the coming fiscal. Current NDA Government at the center is excellently deal with policy paralysis in the country and unblocking the major bottlenecks that are the major hurdle for growth.
Support Affordable Housing:
The Government allowed for a 100% deduction of profits for builders that launch residential projects with unit sized up to 30 sq m in the metro cities of Delhi, Mumbai, Kolkata and Chennai and up to 60 sq m in other cities. Developments that are approved in the period of June 2016 to March 2019 with construction completed within 3 years are also eligible for this advantage.
However, MAT (minimum alternative taxes) will apply. At the side of, current budget has provisioned for the construction of affordable homes, up to 60 sq. m. to be free from service tax. Actually big cities have a very small availability of units in this size range, consequently, the move will increase the launching of affordable homes with on time delivery but real term execution will be a challenge.
RERA Bill
The Real Estate Regulation Act, also known as RERA Bill, assures to secure the interests of home buyers and erase corruption and inefficiency from the real estate. According to a survey, every year approx 10 lakh people invest in residential properties and approx 70,000 big & small builders are active in our country.
Key features of this bill
• Mandatory registration of all developments with the RERA
• Builders have to disclose all the information for registered projects like status of approvals, layout plan, master plan, detail of promoters and many others.
• 50% of the investors' investment has to be deposited into an escrow account that would be used only for the construction of the same project.
• The Bill disallows a developer from altering the plan in a development unless two-thirds buyers of the project have settled for such a change.
• Developers would be accountable for fixing construction faults for five years after the possession.
• In case real estate developer still causes delays in give possession to the buyers, the appellate court would mediate and slap fines on them within 2 months.
Digitizing of land documentations:
Rs. 150 Crore are also approved for digitization of land documentations. In proportion to the Digital India campaign, the Government is going to launch its National Land Record Digitization scheme which is in the final phase, with the purpose of improving transparency and reduce the land disputes. This will be active in streamlining land records, particularly in rural regions.
Tax benefits to first time home buyers:
An added interest deduction of Rs. 50,000 yearly has been provisioned for first time home buyers for loans expanding up to Rs. 35 lakhs in the year 2016-17, with Rs. 50 lakhs as the limit for the value of the property. At present this change will give benefits only to the home buyers of tier 2 cities with the exemption of Rs. 2.5 Lacs and will push developers to enter this affordable segments of homes for home seekers in Tier-1 cities too.
Strengthening of Infrastructure:
In a spree to give support to the infrastructure development in India, the Government approved over Rs. 2 lakh crore to the social infrastructure with an allotment of Rs. 97,000 crores to the highways. Rs. 19,000 crore of this is assigned to the rural districts under the Pradhanmantri Gram Sadak Yojana (PMGSY). To improve the connectivity of Tier - 2 and Tier – 3 cities and offer the very much required push to the infrastructure sector, 160 non-functional airports set to be developed in the coming future with an investment of Rs. 50-100 crore on each airport.
Good news for the dwellers on rent by increasing the deduction of rental fee paid from Rs. 24000 to Rs. 60,000 yearly under Section 80CG. With numerous alterations being welcomed by the real estate sector, the industry still looks for more.
Builders’ expectations:
NDA government will speed up the procedure of granting necessary approvals. The constant delay in this regard has been a major problem for most of their developments.
This government will make simple land acquisition parameters so that availability of land is no longer a major restriction. Difficulties in possessing land because of the present policies have led to immensely escalated real estate price.
At that time, the SENSEX is facing upward movement and the value of Indian rupee is rising, these buyers are expected to snap into action. Improved sales, together with the availability of sufficient funds from both domestic and foreign investors, will bring major respite to developers and finally bring an end to the liquidity crisis that they have been experiencing.
The hope mantra:
Major declarations made by the current government in their policy that have direct pertinence to the realty industry are:
1. Development of 100 Smart Cities
2. New Land Use Policy
3. Affordable Housing
Government’s promise to put into practice an affordable housing policy, and in that way provide homes to every family offers a $150 billion business prospect to the real estate. The realty industry now also has valid hopes of being accepted as a most profitable investment medium.
So, investors are hopeful about the impact that the current government will have on the value of real estate and wait for full execution of all these major steps. But all these are only possible if Real Estate Developers & Government works simultaneously & honestly.
