Top 10 pol­icy ini­tia­tives that have im­pacted the real es­tate sec­tor

De­mon­eti­sa­tion and Be­nami Trans­ac­tions Act have been the ma­jor ini­tia­tives

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The real es­tate sec­tor was in the news all through the year, with the gov­ern­ment an­nounc­ing sev­eral ma­jor pol­icy ini­tia­tives such as the pas­sage of the Real Es­tate (Reg­u­la­tion and De­vel­op­ment) Act 2016 and the amend­ment to the Be­nami Trans­ac­tions Act. But the most talked about was the de­mon­eti­sa­tion of ₹ 500 and ₹ 1000 cur­rency notes used mostly for real es­tate trans­ac­tions.

Some pol­icy ini­tia­tives listed by in­ter­na­tional prop­erty con­sul­tants Col­liers Re­search in­cluded the fol­low­ing 10 pol­icy ini­tia­tives.

Real Es­tate ( Reg­u­la­tion and De­vel­op­ment) Act, 2016: The Real Es­tate (Reg­u­la­tion and De­vel­op­ment) Act, 2016 which came into force in March 2016 has laid down a reg­u­la­tory frame­work which will change the way the real es­tate sec­tor op­er­ates in In­dia. It aims to en­hance trans­parency, bring greater ac­count­abil­ity in the realty sec­tor and set dis­clo­sure norms to pro­tect the in­ter­est of all stake­hold­ers. Speedy ex­e­cu­tion of prop­erty dis­putes will also be en­sured in due course .

Amend­ment to the Be­nami Trans­ac­tions Act: The Be­nami Trans­ac­tions ( Pro­hi­bi­tion) Amend­ment Act, 2016 l ays down strin­gent rules and penal­ties as­so­ci­ated with deal­ings re­lated to ‘be­nami’ trans­ac­tions. It es­tab­lishes a reg­u­la­tory mech­a­nism to deal with dis­putes aris­ing from such trans­ac­tions and levy­ing penal­ties to in­crease the in­sti­tu­tion-in­vestor par­tic­i­pa­tion and reg­u­lat­ing the sec­tor to make In­dia an at­trac­tive investment destination.

100% de­duc­tion in prof­its for af­ford­able hous­ing con­struc­tion: To pro­mote af­ford­able hous­ing, the fi­nance min­is­ter pro­posed 100% de­duc­tion in prof­its to an un­der­tak­ing from a hous­ing project for flats of up to 30 sq me­tre in four metro ci­ties and 60 sq me­tre in other ci­ties. These projects have to be ap­proved dur­ing June 2016 to March 2019. Another con­di­tion was that the project should be com­pleted within three years of grant of ap­proval.

In­ter­est sub­sidy for first­time home­buy­ers: To stim­u­late hous­ing de­mand from first- time home buy­ers, the Union Bud­get 2016-17 also pro­posed de­duc­tion of ad­di­tional in­ter­est of ₹ 50,000 per an­num for first-time home buy­ers for loans of up to ₹ 35 lakh sanc­tioned dur­ing the next fi­nan­cial year for houses with a value not ex­ceed­ing ₹ 50 lakh. This move should pos­i­tively in­flu­ence home sales in non­met­ros in the long term where res­i­den­tial prod­uct prices are not as high as those in met­ros.

Change i n ar­bi­tra­tion nor ms f or con­str uc­tion com­pa­nies: To help the ail­ing con­struc­tion sec­tor, the gov­ern­ment has cleared re­forms in­clud­ing speed­ier res­o­lu­tion of dis­putes and the re­lease of 75% of amounts that are stuck in ar­bi­tra­tion. The gov­ern­ment will now re­lease 75% of amounts against mar­gin-free guar­an­tee in cases where ar­bi­tral awards have been given but have been con­tested. The amount re­leased will be used by con­trac­tors to com­plete projects or pay off debts. This is aimed at im­prov­ing the cash flow po­si­tion of large de­vel­op­ers who have sig­nif­i­cant ex­po­sure in in­fra­struc­ture and gov­ern­ment con­tracts and even­tu­ally help in speedy ex­e­cu­tion of large in­fra­struc­ture projects. Com­ing at a time when most de­vel­op­ers are strug­gling with liq­uid­ity is­sues, this is a boon from an over­all per­spec­tive..

Ser­vice tax ex­emp­tion on con­struc­tion of af­ford­able hous­ing: Ex­emp­tion of ser­vice tax on con­struc­tion of af­ford­able houses of up to 60 square me­tre un­der any scheme of the Cen­tral or state gov­ern­ment in­clud­ing pub­lic pri­vate par­tic­i­pa­tion or PPP schemes will pro­pel con­struc­tion in af­ford­able seg­ment across In­dia and en­cour­age greater col­lab­o­ra­tion be­tween the pub­lic and pri­vate sec­tor as well as par­tic­i­pa­tion in af­ford­able home con­struc­tion.

DDT ex­emp­tion for SPVs to REITs: The Union Bud­get 2016-17 ex­empted any dis­tri­bu­tion made out of the in­come of the Spe­cial Pur­pose Ve­hi­cles ( SPVs) t o t he Real Es­tate Investment Trusts (REIT) and I nfras­truc­ture I nvest­ment Trusts ( In­vIT) from the levy of Div­i­dend Dis­tri­bu­tion Tax. This paved the way for the REIT model to be­come fi­nan­cially vi­able for retail in­vestors.

Im­ple­men­ta­tion of Goods and Ser­vices Tax struc­ture: Goods and Ser­vices Tax (GST) is a pos­i­tive move to­wards sim­pli­fi­ca­tion of In­dian tax sys­tem. How­ever, the real es­tate in­dus­try is still await­ing clar­ity on which items fall into “sin” and “com­mon use” and whether they will at­tract 18%, or 12% pos­si­ble tax rates. Ad­di­tional clar­i­fi­ca­tion is also needed if the im­ple­men­ta­tion of GST will sub­sume ex­ist­ing ser­vice tax and Value Added Tax (VAT), which are levied for un­der con­struc­tion projects cur­rently.

Cur­rency de­mon­eti­sa­tion of 500 and 1,000 ru­pee notes: The re­cent de­mon­eti­sa­tion of ₹ 500 and ₹ 1,000 ru­pee notes by the prime min­is­ter is per­ceived as a sig­nif­i­cant re­form. In the long run, this mea­sure along with Real Es­tate (Reg­u­la­tion and De­vel­op­ment) Act, 2016 (RERA) will align the real es­tate sec­tor to the in­ter­na­tional stan­dards of do­ing busi­ness, re­sult­ing in more fund flow from in­sti­tu­tional in­vestors, banks and higher unit sales.

Pe r ma n e n t Re s i d e n cy Sta­tus for for­eign in­vestors: The Union Cabi­net ap­proved the grant of Per­ma­nent Res­i­dency Sta­tus (PRS) to for­eign in­vestors, sub­ject to var­i­ous con­di­tions and with a pro­vi­sion for re­newal for another 10 years. As PRS al­lows the hold­ers’ spouse/de­pen­dents to take up em­ploy­ment in In­dia, as well as the pur­chase of one res­i­den­tial prop­erty for end-use, the end user pool, mainly for high-end and lux­ury seg­ment prod­ucts stands in­creased which can pro­mote the as­set class in a big way. In­dia is a dis­as­ter-prone coun­try with 85% of In­dian land vul­ner­a­ble to one or more natural haz­ards and that makes it crit­i­cal to have a plan and gauge an or­gan­i­sa­tions’ readi­ness to deal with such sit­u­a­tions, says a re­port by CBRE South Asia Pvt Ltd.

The sur­vey, ti­tled Dis­as­ter Pre­pared­ness Amongst In­dia Cor­po­rates, in­cludes over 100 top cor­po­rates in the coun­try and over 350 re­spon­dents.

The sur­vey was con­ducted to in­crease aware­ness about dis­as­ters, to re-it­er­ate the im­por­tance of proac­tive plan­ning for dis­as­ter man­age­ment and ar­rive at an in­dus­try wide ap­proach for the same. MAS­SIVE LOSSES Com­ment­ing on the find­ings of t he s ur­vey, An­shu­man Mag­a­zine, chair­man – In­dia and South East Asia, CBRE says, “In­dia’s aver­age an­nual eco­nomic loss due to dis­as­ters is es­ti­mated at $9.8 bil­lion ac­cord­ing to a UN global as­sess­ment re­port on dis­as­ter risk.”

This in­cludes more than $7 bil­lion loss on ac­count of floods. In­dia is a dis­as­ter prone coun­try, with 85% of In­dian land vul­ner­a­ble to one or more natural haz­ards, mak­ing it is crit­i­cal to have plan and gauge an or­gani- sa­tions’ readi­ness to deal with such a sit­u­a­tion,” he says.

“In­te­grated and com­pre­hen­sive ap­proach is nec­es­sary to im­prove the safety of build­ings from dis­as­ters, thus we strongly ad­vo­cate an in­creased pri­vate en­ter­prises’ en­gage­ment with gov­ern­ment agen­cies in dis­as­ter risk re­duc­tion ac­tiv­i­ties,” he says.

“Un­prece­dented rate of ur­ban growth, in­creas­ing de­pen­dence on com­plex tech­ni­cal sys­tems, com­bined with cli­mate change pre­dic­tions, have in­creased the dis­as­ter un­cer­tainty even more,” says Gur­jot Bha­tia, man­ag­ing TOP FIVE THREATS The top five threats that have in­creased dis­as­ter risks with rapid ur­ban­i­sa­tion in­clude un­con­trolled use of land, vi­o­la­tion of build­ing codes, poor gov­er­nance, poor qual­ity of con­struc­tion and over­loaded ser­vices. Ma­jor­ity of those sur­veyed said that losses from a dis­as­ter oc­cuer as a di­rect re­sult of dam­age to the built en­vi­ron­ment and lack of plan­ning. Al­most 97% agree that pe­ri­odic au­dits should made manda­tory for all build­ings with re­gard to co­dal pro­vi­sions and com­pli­ances with a quar­terly fre­quency.

As many as 70% were of the opin­ion that re­views to not ac­knowl­edge dis­as­ter and that only 21% at­tempted to in­clude hazard mit­i­ga­tion mea­sures in projects.

The in­tent of the sur­vey is to gauge pre­pared­ness for han­dling a dis­as­ter, aware­ness on the sub­ject, what needs to be done and who all need to be in­volved and who will need to be in­volved.

PARVEEN KU­MAR

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