By Mr Rakesh Reddy, Director, Aparna Constructions & Estates.
Until the onset of the COVID-19 pandemic, the real estate sector in India was emerging from a prolonged slowdown and on the threshold of exponential growth. The sector had witnessed many transformative reforms over the past few years and these reforms had laid the foundation for a strong revival. The key drivers of growth for the sector were regulatory reforms including RERA and GST, relaxation in FDI which will encourage more investment, steady demand generated through urbanisation, rising household income and the incentivisation of affordable housing.
The COVID-19 pandemic also influenced the way consumers approach buying real estate. Home buyers are now taking extra precautions and demanding greater value from the property including amenities, connectivity, and social infrastructure. Interestingly, many buyers prefer larger property sizes to accommodate working from home.This increasing demand for quality housing needs to be supported with adequate regulatory reforms to protect the interests of all stakeholders and bolster the sector’s revival.
The recent Union Budget has aimed at streamlining tax rates, improving credit flow, and minimising administration. These measures must be implemented with immediate effect to ensure surplus funds in the hands of potential home-buyers,which will boost consumer confidence and increase investments.In addition to the above reforms, the granting of infrastructure status to the entire real estate sector would provide a huge boost to its revival. We have seen the impact of infrastructure status on affordable housing with many reputed developers now incentivised to launch much-needed projects in the affordable segment.
The real estate sector requires a streamlined approval processes enforced by RERA and implementation of Single Window Clearance. This will ensure project approvals to be processed more quickly, resulting in reduced construction costs, thereby substantially reducing property costs.
The reduction of the GST rate on under-construction properties was made with the intention of improving consumer sentiments and thereby giving demand a much-needed impetus.However, the current taxation structure for the real estate sector is not efficient and could perform better if streamlined and made uniform for all housing segments. For the benefits to have a meaningful impact, the government would need to look at a holistic approach. The government should also revisit the GST rates levied on the construction materials especially cement and other raw materials. Rationalizing the GST rates of these commodities will bring down the burden of construction cost and the overall pricing also will be positively impacted.
Currently, only the affordable housing segment is benefiting from reduced stamp duty. To entice more home buyers, this benefit of stamp duty reduction should be extended to mid and luxury segments as well. The window of the stamp duty reduction should be extended- allowing at least a 3-year window instead of 1 year. Since the real estate sector has been struggling with the completion of projects due to an acute liquidity crunch, access to alternative funding is a critical requirement. Developers need strong capital flow to maintain the supply pipeline and keep property prices from surging. Incentivising private sector investments would not only help developers but also homebuyers who are awaiting completion of their homes.
These regulatory reforms highlight the far-reaching impact of the real estate sector on India’s overall economic performance. The real estate sector is the second highest employing industry and is one of the major contributors to India’s growth.The sector must be supported by demand-generating regulatory reforms that will accelerate the momentum of real estate sector moving forward.
Corporate Comm India (CCI Newswire)
