Moves that Could Restore Good Times In Real Estate

All has not been well with the real estate sector in India in the past two years. Various factors led to an unforeseen slump in the market, hitting all the stakeholders. However, various recent measures taken by the government in its recently announced Budget for 2016-17 may get the right ground for green shoots in the sector.

PropGuide examines some of the moves, specified in the Budget and otherwise, that may prove to be the starting of 'acche din' for the sector.

Focus on infrastructure

Real estate and infrastructure are inextricably linked to each other. The government has announced a spending of Rs 2.2 lakh crore on infrastructure building. Setting up of 300 urban clusters and construction of road networks is directly going to contribute towards the growth of real estate sector. Real estate in Tier-II and Tier-III cities will also get a boost with more liquidity infusion. The urban clusters will also open a can of opportunities for housing sector and primarily affordable housing in those places. Stalled infrastructure projects would be expedited because of the new infrastructure credit rating system proposed in the current Budget. The Pradhan Mantri Gram Sadak Yojana (PMGSY) and allocation of Rs 97,000 crore to the road sector is also a move in the right direction.

Onus on developers for timely project completion

The Budget proposes that developers can avail of 100 per cent deduction on profits earned in housing projects of up to the size of 30 sq mt in the four metro cities, and up to the size of 60 sq mt in non-metro cities, if they meet their completion deadlines. Only the Minimum Alternate Tax (MAT) would be applicable on such projects. This would lead to more and more projects meeting their completion deadline of three years.

Digitisation of land records

Disputes related to land titles have been plaguing the industry and the landowners. Many infrastructure and realty projects are stuck due to this ambiguity. Land records digitisation is important to make the whole process transparent and free from encumbrances. The National Land Records Modernization Programme (NLRMP) has got a boost from the government in the current Budget. The Budget outlay of Rs 150 crore for digitisation of land records beginning April, 2016, will also result in huge savings. A rupee spent towards this would save at least Rs 10 of the country's economy.

Improving airports

The Budget proposed to revive 160 unserved and underserved airports to increase connectivity in the neglected areas. This will instantly increase the real estate potential of such cities. Concessions in the form of corporate taxes to manufacturing companies will not only help realise government's “Make in India” programmes but also create jobs which would in turn generate demand for housing.

Government initiatives

Government initiatives such as the Housing for All by 2022, the Smart City Mission and the Digital India Mission will all boost the real estate sector growth. The government wants to build 60 million houses by 2020 and 100 million by 2022. To realise this dream, the government would need to work in closely with the real estate sector.

The regulatory framework

The government may be able to pass two crucial Bills, the Goods and Services Tax Bill (GST Bill) and the Real Estate Regulatory Bill, soon. Once implemented, the Real Estate Regulatory Bill is expected to usher in more transparency and developers' accountability. This will weed out the non-serious players from the market and revive investor confidence.

The GST Bill will further rationalise the tax regime and pave the way for unification of markets. Ambiguity and conflicts on taxation will be reduced, resulting into lower costs for the property buyers.

Ready-mix concrete fully exempted from excise duty

So far, excise duty exemption was only available to concrete mix manufactured at the site for being used in construction work. This exemption has now been extended to include ready-mix concrete manufactured at the construction site. The earlier demarcation resulted in ambiguity and conflict. The move will result in lowering the construction costs. Developers will pass on this benefit to the home buyers, and ultimately the cost of housing will witness reduction.