The Government needs to implement a series of measures to revive market sentiment and buyers’ interest in Indian realty because it has the potential of powering growth in about 200 other verticals thereby becoming an engine of growth besides ensuring ‘Housing for All’ by 2022
India’s real estate industry is on the cusp of a take-off toward sustained and rapid development. The overall economy, which is etching distinct marks of growth, is acting as the perfect launch pad. Sentiments among investors and stakeholders are high with demand seeing an uptrend. But no growth can sustain itself without the backing of proper, robust policy measures, and this is just the right time for the sector. So the responsibility of the Government has become all the more critical in initiating a slew of productive instigators that will help sustain the sentiments and ramp up growth.
LOWER INTEREST RATES
To begin with, interest rates on home loans need to come down. Although the government has already taken some measures to reduce interest rates for affordable homes and raised the deductions against interest payments on home loans, these measures are not enough, since they will largely benefit people who purchase flats in the lower price bracket. For buyers purchasing flats in metro cities that usually cost more than a crore, the benefits are negligible. The authorities need to ensure that home loan and interest rate benefits are available for all buyers, not just those at the lower end.
The NDA Government has already announced it will focus on ensuring homes for all citizens by 2022, creating 100 new smart cities and developing infrastructure across the country. The intent is clearly good, but implementation of such promises is most important. For this to happen, the Government needs to create an enabling environment. The first step towards this goal would be to demolish the thicket of regulations that constrain the industry and ensure that there is single-window clearance for all realty and infrastructure projects.
The authorities could also consider the possibility of granting online approvals via time-bound processes. This will eliminate the possibility of corruption in the granting of approvals, usher in a measure of transparency and ensure it is clear why approvals or rejections have taken place.
The other important measure would be to grant infrastructure status to the realty sector. Securing funds has always been difficult for developers and whenever these are available, the interest rates have always been high, pushing up project costs. Infrastructure status for realty would immediately ease liquidity issues, as funds would become available at competitive rates of interest. Even private equity and FDI funds would then become more easily available, since infrastructure status would promote greater transparency and better regulatory oversight.
No growth can sustain itself without the backing of proper, robust policy measures, and this is just the right time for the sector
The Government should also take steps to pass the Real Estate Regulation and Development Bill as early as possible, which will professionalise services and be a further boost for transparency. The other piece of legislation that needs urgent review is the new Land Acquisition Bill. The Bill’s present guidelines make it well-nigh impossible to buy land at reasonable rates in the least possible time.
While the Land Acquisition Bill may be well meaning in intent, its laborious norms will only end up increasing litigation between land sellers and buyers, smothering the dream of affordable housing. The law should ensure that while land sellers receive a fair price, developers are able to acquire land without undue delays and at competitive rates.
Another problem that holds back the industry is the multiplicity of taxes on the purchase of flats, which can put many properties out of the buyers’ reach. Besides registration charges, for instance, buyers have to pay stamp duty, service tax and value-added tax, which can inflate the price of a flat by a few lakh rupees, making otherwise affordable properties unaffordable for many.
Against this backdrop, it is important that the Government quickly implements GST (Goods and Services Tax), which will then subsume the other taxes and levies. A single measure such as GST could truly give a fillip to all economic activities in India, including the real estate sector. This could play a big role in generating positive sentiments in the Indian markets, which has been missing for long.
The Government should give due importance to real estate because it is connected to and influences almost 200 other verticals. A thriving real estate sector could therefore act as a growth driver for all the other allied industries in India. That is the only way that the Government’s dreams of an affordable home for all Indians will finally become a reality before 2022.