The government however did try to promote the real estate sector by loosening some of the conditions around the tax-free scheme for affordable housing.
By Rohit Gera
2017 will go down in the history of Indian real estate as the year that changed the sector forever. Never in the history of Indian real estate have so many major events taken place within such a short period of time.
The year started in the aftermath of demonetization with wild speculation and predictions that prices would correct 30% to 40% across the country. This as expected put a stop on new sales. As anticipated, such talk about price correction is music to anyone who is actively searching for home.
The government however did try to promote the real estate sector by loosening some of the conditions around the tax-free scheme for affordable housing. This along with the inclusion of middle income group into the category of people who can avail of the interest subsidy from the government pushed developers to reconfigure their product mix towards more affordable housing. As a result, the average size of homes launched has dropped drastically.
The other big impact has been the introduction of the real estate regulatory act (RERA). In one action, the government has made delivery to the customer a priority and simultaneously ensured that developers who earlier could launch a project with virtually no capital now require financial strength and capability before entering the business. This led to a cleaning up and weeding out of fly by night operators whose sole objective was to prey on hapless home buyers. The introduction of GST will further streamline the supply chain of developers and bring many small-time contractors and vendors into the GST net.
While India has improved on the ease of doing business rankings put out by the World Bank, the one stubborn category that barely moved was the ease of dealing with construction permits where the movement was from the rank of 185 to 181. Looking forward, unless the government addresses the ease of dealing with construction permits, there is no way India’s ranking can improve to the goal of 50. The government is determined to reach the rank of 50 and therefore one can certainly expect an improvement in dealing with construction permits which will further streamline and professionalise this sector in the near future.
For the real estate sector to actually start seeing a good momentum of sales (which is necessary to raise the overall GDP of the country) there needs to be a stable tax structure and tax regime. The current chatter around taxing the unsold ready inventory with developers further leads to instability in the mind of the home buyers. This causes further deferment of the decision to buy a home. This is detrimental to the industry and the economy.
As RERA settles down and the economy recovers from the impacts of demonetisation and GST one can expect better days for the real estate sector in 2018.
(Rohit Gera is the Managing Director at Gera Developments Pvt. Ltd. & VP CREDAI Pune Metro)
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