The year 2016 was a landmark year for the real estate industry. A series of reforms like The Real Estate Regulatory Bill, the Real Estate Regulatory Authority, the Prohibition of Benami Property Transaction Act, the Goods & Services Tax, and the demonetisation of Rs. 500 and Rs. 1,000 notes were announced. Despite initial concerns, these initiatives are set to transform realty in the long term.
To begin with, both the Real Estate (Regulation and Development) Bill, 2016 and establishment of the Real Estate Regulatory Authority (RERA) will prove to be game-changers for the industry. Once these norms are fully operational, it will promote professionalism and transparency and create a more level-playing field between buyers and builders. For instance, the Real Estate Bill mandates the same penalty of 18% for builders delaying possession or buyers postponing payment. Thanks to such even-handed measures, the high trust deficit that exists between both stakeholders would be reduced considerably.
The other game-changing reform is GST or Goods & Services Tax. On the anvil for more than a decade, GST would help subsume a series of Central taxes and State-level levies that have hobbled the industry for decades. Service tax, VAT and stamp duty have been some of the major levies leading to higher prices for customers. The new GST policies will make property more affordable for buyers across all categories.
Similarly, the Benami Transactions (Prohibition) Amendment Act, 2016, which gives it powers to confiscate benami properties. These are real estate assets under fictitious names or in another person’s name in order to avoid taxes and thereby conceal unaccounted wealth. This Act will help reinforce the fight against tax evasion.
Besides these longstanding measures, the surprise demonetisation of Rs. 500 and Rs. 1,000 notes led to 86% of the currency in circulation suddenly being declared non-legal tender. Although there are many dire predictions about it’s negative impact on real estate, it is necessary to take a pragmatic long-term perspective. Demonetisation will bring about transparency, which will be good for the industry because the prices will reflect actual market dynamics rather than being driven by other factors. Ultimately, every reform and initiative taken to boost transparency and promote online transactions will benefit the economy at large, including the real estate industry.
Though 2016 was lackluster for the sector, introduction of policy reforms has brought some solace with the fraternity, which will augment the status quo of real estate in the coming year. We are confident that as professionalism, global best practices, transparency and market-based pricing become the norm, the real estate market will turn more attractive for investors in India for 2017.