How can the new government expedite the real estate sector’s recovery?

[ecis2016.org] From addressing the liquidity crisis, to policy reforms and taxation, we look at what industry players want the government to do for the real estate market in its second term

With the General Elections of 2019 giving a clear mandate for Narendra Modi to return as prime minister for a second term, the real estate sector is optimistic, as this would mean a continuation in policies. The government took several major policy decisions in the last three to four years and industry players and the middle-class buyers, are now expecting the benefits of these decisions to start showing. “Over the past few years, the government has introduced reforms, such as demonetisation, the Real Estate (Regulation and Development) Act (RERA), the Goods and Services Tax (GST), changes to the Benami Properties Act and bankruptcy laws, all of which have changed the paradigm of real estate. The government also created affordable housing as a segment. The past couple of years can be best described as a period of ‘short-term pain for long-term gain’. We should now see the positives impacting the real estate sector,” says Niranjan Hiranandani, president, National Real Estate Development Council (NAREDCO).

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Impact of a stable government on reforms, infrastructure and buyer confidence

Shantilal Kataria, vice-president of CREDAI India, points out that stability is very important in any business and particularly in the property market. It is crucial for developers and buyers, for taking fast decisions. “The new government is serious about prioritising infrastructure projects. Hence, the Navi Mumbai airport and metro projects in Maharashtra, are likely to benefit, along with all other projects in India,” he feels. Anup Kumar, director, industrial practice, Frost & Sullivan, adds: “A stable government will be in a position to implement reforms faster.”

Property buyers can also have confidence, knowing that there is a stable government working to protect their interests with such reforms. In spite of the hardships faced by the real estate sector, the reform agenda has been welcomed by all stakeholders. Hardik Agrawal, CEO of Radha Madhav Developers, maintains that “Due to the reforms, the consumers’ confidence has increased in the market.” As a result, growth potential is high, for developers, end-users and investors, he says.

Decisive verdicts are signs of stability and add to business confidence, concurs Ankur Jain, CEO of Group Satellite. “Now, the remaining uncertainty factor in Maharashtra, is the state elections. The real estate sector had to deal with a lot of uncertainty in the recent past, like the changing DCPR 2034, liquidity issues due to the IL&FS crisis and changes in GST rules. With FSI increase in the DCPR 2034, we expect a lot of supply to hit the market in the next 12-24 months, which is already dealing with oversupply. In terms of property prices, it will be a buyer’s market for the next 12-24 months,” he asserts.

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Real estate industry’s expectations from the new government

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Streamlining of the approvals process

The real estate fraternity’s first demand from the new government, is to create a conducive environment for ease of doing business.

Rajiv Parikh, president, CREDAI Maharashtra, elaborates: “The issues regarding environmental clearance, town planning, non-agricultural permissions and mutation entries, should be dealt with. It has been our long-standing demand to make sanctions for projects available online, to speed up the process, as this is a key area which inflates property prices.”

Focus on technology and infrastructure

The government’s past reforms have had a major bearing on the affordable housing segment. Navin Makhija, managing director of the Wadhwa Group, says that “Another boost to these projects can be through infrastructure development. As a result of faster completion of these projects, the residential realty segment in and around the city of Mumbai, stands to benefit.”

Encouragement should be given to the introduction of new technology, for speedy, economic and hassle-free construction.

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Nimish Gupta, FRICS – MD, south Asia, RICS, suggests that “We need to create an inclusive and conducive business environment, where international firms can lend their expertise and resources. We should also consider establishing a Construction Regulatory Authority (CRA), to create a fair and level playing field for construction activity to flourish. The regulatory mechanisms should boost cash flows in the sector, which can be facilitated through the ‘Digital India’ mandate, by technology and other platforms that are available.”

Relaxation in taxation

Parikh adds that the new government should look into reforms of tax structures. “The realtors engaged in fulfilling the ambitious ‘Housing for All’ scheme through affordable housing, should get more incentives,” he says. Gaurav Gupta, director of Omkar Realtors wants the new government to take a relook at the current GST structure for SRA and redevelopment in Mumbai. “This accounts for close to 55%-60% of all development work being carried out, with the balance development accruing from open plots and mill land. It is a case of ‘double taxation’, compared to the sale of vacant land, which is subjected to a single taxation slab with GST exemption,” he explains.

Housing for all

Other players want the government to improve micro-finance for the lower and middle income groups. Subodh Runwal, director of the Runwal Group, hopes that the government will make housing affordable in all the major metros, by reducing taxes, premiums and GST levy and also infuse liquidity into the banks and NBFCs dealing with the real estate sector. Atul Goel, managing director, Goel Ganga Developers Pvt Ltd, wants the government to address the availability of funds. “If positive measures are implemented by 2020, we can expect a boom in the market,” he concludes.

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