Bringing In A New Era In Real Estate

The year 2016 saw several key economic and policy developments. It was a year of landmark moves, wherein the government brought in many policy changes and we can expect profound impacts of these changes in the real estate sector.

Real Estate (Regulation and Development) Act, 2016 (RERA) was created to build an institutional infrastructure to protect the interest of consumers, while promoting growth of real estate in India. The Act will help infuse efficiency along with transparency in the Indian real estate sector.

Even though compliance related cost escalations will be on the rise for developers in the long run, this must also be perceived as a huge opportunity for developers to turn their focus on timely deliveries of projects, while maintaining flexible pricing and payment structures.

At the heart of it, RERA will pose a big boon for property buyers. Transparency and accountability is a welcome move, and the implementation of this Act will discipline the industry, boosting its health in the long term.

Policy Impacts
Coupled with the Benami Transactions Act, the industry is poised to be even more transparent, while the implementation of the Goods and Services Tax (GST) is expected to reduce compliance costs, although clarity is still expected on the tax structure under GST.

A regulatory mechanism is much needed to deal with disputes arising from ‘benami’ transactions, and levying penalties, while regulating the sector will help it to become an attractive investment destination.

The 2016 Union Budget also exempted distributions made out of income of Special Purpose Vehicles (SPVs) to Real Estate Investment Trusts (REIT) from the levy of Dividend Distribution Tax. The REIT model can finally become a financially viable option for retail investors with this move.

Foreign investors can also expect to receive a Permanent Residency Status (PRS), subject to various conditions, and will allow the holder’s spouse/dependents to take up employment opportunities in India. This move will have a direct impact on high-end and luxury segment products in the country.

The Way Forward
Demonetisation has prepared India for a digital revolution and is changing the payment landscape in the country. This move will help to steer more liquidity in the banks that can lend money at better rates and provide better credit terms to both developers and home buyers.

A low interest rate can give the real estate sector a boost by escalating sentiment and demand over time, driving better sales. Even though land deals, including residential sales, have seen a downturn across India, they are expected to pick up in the coming year.

A positive impact of this move will also see cleaner transactions in the industry, helping both developers and consumers.These policy moves will play a huge role in achieving goals that aim to trigger more robust growth, while creating an atmosphere that is appealing to foreign investors.

As we move towards a digital era in our economy, we can expect a uniform pricing system in real estate, ultimately helping build buyer confidence, transparency, and trust in the sector. However, to implement and sustain these policy changes, the government must put into place critical infrastructural and economic necessities for the industry.

Gathering much ground in 2016, the coming year is expected to witness a major change in the way the industry functions, ringing in a new era in the real estate sector.