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
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.
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