Bihar debacle can bring in good times for realty

Vinod Behl

Contrary to the general impression, the defeat in the Bihar Assembly  elections has not dealt any blow to the reforms agenda of the ruling  National Democratic Alliance. Rather, it has proved to be a  blessing in disguise for the Prime Minister Narendra Modi’s government to fast-track reforms — legislative and administrative.

For the realty  sector, those that stand out include the move for a pan-India goods and  services tax regime and legislation for a real estate regulator, both  of which are expected to get nod in the current winter session of Parliament. The delayed reforms  had affected the market sentiment and the government has been receiving flak for its inability to check retail inflation and generate  employment.

Realising the need to provide  momentum to reforms  to leverage strong domestic growth in the  form of healthy seven per cent plus GDP growth in the coming fiscal, the government is likely to press ahead on the reforms front. 

Easier FDI norms

Close on the heels of the Bihar defeat, the government gave a Diwali  bonanza by easing foreign investment norms in 15 major sectors, including  construction, and raising the approval limit for the Foreign  Investment Promotion Board (FIPB) from Rs 3,000 crore to Rs 5,000 crore.  

It removed entry and exit barriers in the construction sector, doing away  with area restriction of 20,000 sq m  and capitalisation of $5 million  and allowing foreign investors to exit and repatriate investment before a project is completed but with a lock-in period of three years.

GST on track

The most crucial piece of legislation that has a big bearing on real  estate is the GST Bill which is expected to be passed in the current parliament  session, especially as the government has  now adopted a collaborative and accomodating approach. 

It will result in simplification and uniformity of taxes, putting an end  to tax inefficiency in the form of different state-specific VAT and  service tax laws. Though there are two main taxes for home buyers —  VAT and service tax — multiple taxes in the form of CST, custom duty, excise duty and the like paid by developers result in price escalation by about 25-30  per cent. A likely GST rate of about 20 per cent should be  quite beneficial for the  sector in lowering the current tax burden, in turn resulting in reduction of  home prices. Separately, the government, proposes to provide tax relief  to the real estate sector in the budget for 2016-17.

Regulator in sight

The decks are already cleared for crucial Real Estate Regulation &  Development Bill, 2013 in the winter session as the government has   accepted changes proposed by a Rajya Sabha panel. This Bill will give a major boost to real estate sector, bringing in fair  play and transparency in transactions to safeguard the  interests of buyers and investors.

Single window clearance 

The government, which has already streamlined environment clearances for  improving ease of doing business, is now fast- tracking single window  clearance system for multi-storied buildings that should come through by  early December 2015. The simplified process will considerably cut delays  in granting approvals, in turn resulting in cost reduction that will  benefit property consumers.This will also provide much-needed relief  to debt-ridden developers by way of faster projects completions and  lesser interest outgo.

More funds for Housing For All

For its flagship programme Housing for All, envisaging building 30  million houses, government is readying a plan to provide more funds for  constructing rural houses and providing subsidised power and water. Under its AMRUT programme, the Centre has allocated Rs 11,654 crore for  infrastructure upgrade.

The government’s new found aggression and resolve to push reform agenda,  has already seen the BSE Realty Index, registering the most rise in the  last fortnight and further reform measures to be unveiled in the budget,  will serve to speed up the revival of real estate facing slowdown.  — IANS

Investment thrust

The government is focusing on triggering investment. By exercising tight  control over unproductive expenditure, it has greatly increased capital  investment by the public sector. And to further push this, the National  Investment and Infrastructure Fund has been set up to leverage public  investments. The government also plans to come up with tax-free infra  bonds to broaden corporate bond market and provide for long-term finance for infrastructure. It is also looking at providing tax  incentives to spur investment in housing.