Legis­ta­tive ini­tia­tives give hope to realty sec­tor

A cou­ple of pol­icy amend­ments from the gov­ern­ment will pro­vide in­cen­tives to real es­tate in­vestors and de­vel­op­ers who are want­ing to raise cap­i­tal

HT Estates - - HTESTATES - An­shu­man Mag­a­zine

The real es­tate and con­struc­tion sec­tor saw a spate of leg­isla­tive ini­tia­tives from the gov­ern­ment in re­cent times, many of which are cur­rently be­ing de­bated in par­lia­ment.

The gov­ern­ment paved the way for the smooth launch of REITs by clar­i­fy­ing that Min­i­mum Al­ter­nate Tax (MAT) would be levied only on ac­tual trans­fer of shares on list­ing and For­eign Di­rect In­vest­ment (FDI) norms would be al­lowed in rent- yield­ing com­mer­cial as­sets, thereby re­mov­ing a key in­vest­ment re­lated re­stric­tion by FEMA. The only other in­dus­try de­mand pend­ing in this re­gard is the de­mand for ex­emp­tion of Div­i­dend Dis­tri­bu­tion Tax (DDT). Both th­ese pol­icy amend­ments would prove to be in­cen­tives for real es­tate in­vestors and de­vel­op­ers look­ing at rais- ing cap­i­tal via the REIT-route. At a time when the realty sec­tor is strug­gling for al­ter­na­tive av­enues of fund­ing, REITs will likely im­prove liq­uid­ity in the com­mer­cial real es­tate mar­ket.

In April the gov­ern­ment also an­nounced in­ten­tions of in­vest­ing ₹ 100,000 crore for build­ing 100 smart cities and to re-de­velop 500 ex­ist­ing cities over the next five years. Re­plac­ing the erst­while Jawa­har­lal Nehru N at i o n a l U r b a n Re n e w a l Mis­sion (JNNURM), the new ur­ban re­newal mis­sion has been rechris­tened as the Atal Mis­sion for Re­ju­ve­na­tion and Ur­ban Trans­for ma­tion ( AMRUT). While the Smart Cities Mis­sion would in­vest about ₹ 48,000 crore over the next five years, AMRUT will in­vest about ₹ 50,000 crore to re-de­velop the 500 ex­ist­ing cities dur­ing the same pe­riod. The gov­ern­ment also ap­proved the Real Es­tate Reg­u­la­tory Bill, in­tro­duc­ing com­mer­cial in its cov­er­age of seg­ments; even as the lower house of the par­lia­ment ap­proved the Goods and Ser­vices Tax leg­is­la­tion.

How did the hous­ing mar­ket do? Hous­ing launches re­mained low in the month of April, with cities ex­hibit­ing di­verse de­mand trends. Among the lead­ing cities, Chen­nai ob­served the high­est quan­tum of new launches in the mid-end seg­ment, largely con­cen­trated in the south­ern lo­ca­tions of Thaiyur, Sem­mencherry, Pallavaram, Naval­lur, Ad­yar and Gudu­vancherry. Ad­di­tion­ally, new project launches in mi­dend and high- end seg­ments re­mained buoy­ant in Mum­bai, Ban­ga­lore and Pune; while Delhi NCR, Hy­der­abad and Kolkata saw limited launches dur­ing the month. Lo­ca­tions such as Kan­di­vali, Ban­dra, Gore­gaon and Powai in Mum­bai; Ho­ra­mavu Road, Budi­gere Cross, Hen­nur Road and JP Na­gar in Ban­ga­lore; and Wagoli and Kharadi i n Pune have seen sig­nif­i­cant res­i­den­tial de­vel­op­ment.

Mean­while, Mum­bai, Chen­nai and Ban­ga­lore at­tracted steady hous­ing de­mand, pri­mar­ily for newly launched projects in the mid-end /high-end seg­ments. How­ever, home buyer de­mand re­mained sub­dued in Delhi NCR, Pune, Hy­der­abad and Kolkata.

Over the past few months, hous­ing de­mand has weak­ened against the back­drop of higher prop­erty prices and in­ter­est rates. Fol­low­ing the Cen­tral Bank’s an­nounce­ment of a sta­tus quo mone­tary pol­icy in early April, a few na­tion­alised and pri­vate sec­tor banks have cut lend­ing rates. Go­ing for­ward, fur­ther re­duc­tion in lend­ing rates is likely to help im­prove slug­gish prop­erty sales in the short to medium term.

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