The real state sector has been struggling over the past few years with high inventory, price stagnation, falling sales numbers. The current government has taken a lot of initiatives ranging from passing the RERA (real estate regulatory authority) Bill in 2016, implementation of the Goods and Services Tax (GST), providing interest subsidy for affordable houses under Pradhan Mantri Awas Yojana under the "Housing for All" scheme of the government and Benami Transactions (Prohibition) Act, Insolvency and Bankruptcy Code etc. But there is a lot more that needs to be done as the real sector is yet to see any green shoots of recovery. The recent NBFC crisis may further dent the recovery of the sector if the government fails to take some quick action.
Here is what the real estate industry expects from the new government to help the real estate sector recover faster.
Faster clearances: A single window clearance is a long pending demand of the real estate industry. Delay in getting clearances leads to increased cost, which ultimately has to be passed on to the home buyer. A faster approval process with reduced documentation will benefit the industry and ultimately the home buyer. "We expect that the new government can do away with unnecessary documentation, which will help real estate players immensely. It is important that single window clearance is soon put into practice, which will not only resolve operational issues prevalent in the industry but would improve the productivity of the real estate industry. Currently, the permissions are coming at a snail's pace," says Surendra Hiranandani, Founder and Director, House of Hiranandani.
"The sector had slowed down a bit since the sequential jolt of GST and demonetisation but the new GST regime for the sector was a big relief. We expect the government would take measures to expedite and streamline the environment clearances for the new projects, which is a 2 stage process and takes 2 to 3 years. The sector hopes better stability in the regulatory norms without too many changes," says Rohit Poddar, Managing Director, Poddar Housing and Development ltd and Joint Secretary, NAREDCO West.
Input tax credit under GST: In order to boost the demand in the real estate sector GST council has reduced the GST rate for under-construction flats to five per cent from 12 per cent and for affordable housing to one per cent from eight per cent, from April first for all new projects. It was a welcome move from the home buyer's perspective as it will reduce the cost for them but without the input tax credit the margins of developers are likely to get impacted. "Recent GST implementation at 5 per cent with the abolishment of input tax credit again was detrimental for developers as the cost side GST is still exorbitant and not yet lowered in tandem. Hence, the expectation in new tenure is that the government shall revise down input side GST rates to restore shrinking margins of developers, which took a hit due to increasing cost and lower pricing due to the bleak business environment on the back of high unemployment, NBFC crisis, GST ambiguity and RERA implementation driving investors out," says Parth Mehta, Managing Director, Paradigm Realty.
Aditya Kedia, Managing Director, Transcon Developers, says, "The softening of GST norms in terms of privilege pertaining to input tax credits for developers, the inclusion of stamp duty, registration charges and taxes on the cost of electricity under GST will be instrumental in bringing in equilibrium between the demand and supply in the segment. Moreover, the reduction of GST on cement from 28 per cent to 18 per cent will add onto lower production cost, which in turn will contribute to the lower price of the final product".
Continue focus on Housing for All: The government has taken multiple steps like providing interest subsidy, for affordable housing, infrastructure status and reducing the GST rates etc to achieve its objective of "Housing for All by 2022". The industry expects the government to remain focused on its objective. "Housing for All was a dream that has seen considerable success and this time around, the dream will be led to its logical completion hopefully with the government's continued focus," says Abhishek Kulkarni, Chairman and Managing Director of Million Sqft Realty.