The real estate industry has been watchfully waiting for the Union Budget for 2015-16 to be announced. The industry is hopeful with mounting expectations that the new government would do the needful to outline a new economic vision for our country.
Below are the few expectations listed:
· Reduction of multiple taxes: The Budget will be closely watched for its approach on taxation which includes different taxes which any consumer needs to pay while purchasing any flat/house. Thus a relaxation in these would definitely boost the purchasing power of consumers.
· Diminish the cost of borrowing: In real estate industry, raising capital has always been a matter of concern. Be it bank or any source, raising capital has always been exorbitant. Thus, hoping for a considerable reduction in the interest rate for the builders with pace the speed of transaction in the industry wherein the lower cost incurred at construction will over all bring down the cost being offered to the consumers.
· Standardize cost of building materials: It has been observed that ‘inflation’ has been one of the leading factors in capital appreciation of properties in Indian real estate industry. The fluctuations in the cost of construction materials (like cement, iron, concrete, etc.) has many a times lead to the forceful property price rise. Thus, the government is should regulate the prices of these materials by putting upper ceilings on their prices.
· Seeding in new investments: Making way for the newer investment in the sector by clearing the backlog of pending projects for new investment to come in.
The real estate market in India has been largely unorganized in terms of its processes and integral legal system. There has been no central regulatory body and each state has its own set of norms and approval processes. However, with the announcement of The Union Budget 2015 around the corner, we are expecting a speedy single window clearance of realty projects.
Being a real estate player in, we still believe there are a lot of challenges faced by players in the industry when it comes to legal processes. One of the biggest challenges which prevail is that of slow pace of approvals. The want for single-window clearance in the sector for real estate projects has now become an imperative that the government must act on. Thus, as a solution, we feel the industry requires a system that can ensure prompt approvals which further will cut down the turnaround time that a real estate project requires to be developed in India.
Recently, the Union Cabinet has sanctioned a plan to incorporate the ordinance route to mend the Land Acquisition Act in order to boost hundreds of billions of dollars in delayed realty projects.
The decision to implement ordinance path, has offered a relaxation in terms of time period offered for the regulation of unused lands. As per Section 101, the time period after which a piece of unutilized acquired land is to be returned to its owner has been amended, thus made flexible. Prior to this, the law stated that if any acquired land has not been utilized after five years, it should be returned. However, with ordinance coming into the action, the provision has been amended from ‘period of five years’ to ‘period specified for setting up of any project or for five years, whichever is later’ which clearly hints at that any individual/company now with unutilized acquired land can keep it for the period it laid down for setting up the project, even if it is crosses the timeline of five years.
The past decade has seen the Indian real estate industry on a roller coaster ride through many highs and lows. With FDI allowance in real estate sector by new government, we are much positive about the bright future of the sector. The definite plans of building smart cities across the country with an allocation of Rs 7,060 crore in the budget towards it and redeveloping other small cities is surely a sign of a booming real estate industry in near future. Moreover, the relaxation and friendly policies for investors is a clear sign of attracting investments from big investors and NRI investors as well. Not only this, the open FDI policy will bring in opportunities for cheaper capital for smaller projects as well, improving quality and delivery of low cost and affordable housing projects. Additionally, other provisions like- reduction in built-up area and size of projects will also permit mid-sized and smaller developers to be a part of FDI and thus boost affordable housing in the country.
Moreover, we believe that government can definitely take the necessary steps to boost the affordable housing segment in our country. On the same lines, we had few suggestions:
· Public and private partnership schemes should be initiated, where government must allocate lands to the developers which will overall ease the process of the execution from developer’s end
· Govt should lighten the tax burden on developers. It should relax the tax norms especially for the developers of affordable housing
· Govt should draft the standard design and plans for affordable housing for developers so to minimize their time in seeking approvals
· Govt should bring in strong infrastructure like ring roads which will connect outer part of the cities hence which will further assist in the execution of affordable housing projects
With series of positive steps taken towards the real estate sector, we are optimistic about the judgment pertaining to the Real estate regulatory bill, which is yet to come out. We are expecting 2015 to be a turnaround for the real estate industry and if the bill comes out as per the industry expectations, it will definitely bring in good transparency in the system, will provide assistance in FDI and wipe out difficulties in raising capital from banks and other financial institutions. Moreover, for buyers, protection will be extended to them from non-credible players and fraudulent practices.