As the beginning of 2016 was not so remarkable for the real estate segment, the industry was in fuss by the end of the year post to announcement of note ban. But good part is that the industry has delivered ground-breaking results in terms of sales and the new launches. Considered as the harbingers of credibility and transparency, reforms like GST and RERA have essentially put the real estate segment at par with professionally-run organisations. Following five reforms will definitely reshape the realty segment in India in 2017:
The transactions in the realty sector virtually dried up as an immediate effect of Modi government’s demonetization drive. As the secondary market visualize more impacts compared to the primary market in real estate, the prices also observe dips in secondary sector. But, as the policy is intended to curb unfair trade practices and inconsistencies, the commercial transactions are effected to be impacted in short-term. However in longer run, the move is expected to bring more credibility and transparency which result in boosting up the interest of prospective buyers and investors in real estate.
Real Estate Investment Trusts (REITs)
To secure the interest of smaller investors in ‘Grade A’ commercial real estate, this important move has been initiated by the government. Around 229 million sq ft of office space is REIT-compliant only, assuming it to be the 50% of the total area, the total REITs listing is expected to go up to $18.5 billion. India’s first REIT listing is expected to happen within next one year.
Goods and Service Tax
Bringing single largest taxation reform with the application of Goods and Service Tax (GST) is aimed to eradicate geographical barriers between various businesses by mitigating the differences in indirect taxes which are applicable across different states in India. Clarity on the applicable GST rate for the real estate segment is expected to driven out by next year. The initial deadline for its implementation was April 1, 2017 which has been further postponed to September 8, 2017 as the initially announced date seems to be missed through. Clarity on tax credits for real estate transactions and allowance of input credit is expected to bring down the home prices.
Benami Transactions Act
To curb the cash flows in real estate by unfair means and rendering property holds under fictitious names shall be curbed under this Act. Making these means a punishable offence and imposition of heavy penalty on property transactions carried out in cash by the Budget 2015-16. This move will make it next to impossible to park the unaccounted cash inflows in real estate segment.
With the enactment of Real Estate (Regulation and Development) Act 2016, a transparency to the real estate sector is been brought like never before. It mandates every union territory and state to establish a Real Estate Regulatory Authority (RERA) to oversee the real estate activities in their respective territories. Uttar Pradesh and Gujarat have already implemented the act. Currently only a handful of UTs and states shall implement RERA but soon it is expected to implement across all the states and UTs in India.
With the aim to bring more transparency, these reforms surly bring a new dawn for real estate sector and will build a robust ecosystem in the days to come. From the prospective of reforms, year 2016 has been considered as a big year which will have huge positive impacts in year 2017 as the outcomes of these reforms.