by admin | May 25, 2021 | Opinions
By Vinod Behl,
Landmark reforms like RERA and GST, as also demonetisation, have brought about much-needed transparency in transactions, helping the real estate sector to free itself of fraud, malpractices and other problems faced by consumers and investors. Yet, the sector needs more reforms to break free of the various ills that still plague it in order to realise its full potential as a major contributor to the country’s GDP.
The reform-oriented Narendra Modi government, which is fine-tuning and reinforcing the reforms undertaken by it to increase their on-ground efficacy, has its task cut out to free real estate from high transaction costs, especially to achieve the success of its flagship mission of “Housing for All”.
Though the interest subsidy scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY) has proved to be a big boost for first-time home buyers in the EWS, LIG and MIG category, yet high transaction costs are a deterrent to home ownership. Currently, GST, stamp duty and registration costs act as a dampener. There is an average stamp duty of six percent and it is not uniform and is much higher in some states. Further, in many cities, there is the anomaly of collector rates of property being higher than the market rates.
As such, home buyers end up paying more stamp duty and registration fee. Home buyers need to be given freedom from high transaction costs to boost sales and revive residential real estate, facing a slowdown for long. And this can be achieved by either rationalising stamp duty or simply subsuming stamp duty in GST. Similarly, while GST has imporved ease of doing business by doing away with multiple taxation, there is still a need to lower its 12 per cent rate, which is almost double the VAT and Service tax prevalent in pre-GST era, especially when Input Tax Credit provided by the government is not having the desired effect. Further, the high GST on cement should be brought down as in the case of paints, to bring down the cost of homes.
Home buyers also need freedom from the double burden of rent and EMI, particularly as hundreds of thousands of housing projects across the country are facing long delays. Earlier, the home buyers would get possession of their homes in 3-4 years but now, in many cases, it has almost doubled, causing great hardships to home buyers in terms of dual burden of rent and EMI. Some developers are helping home buyers tide over this problem by offering schemes to pay EMI only after possession. But ready homes is a sound solution to this problem as they do not have any development risk and, moreover, home buyers save on 12 per cent GST.
That’s why ready-to-occupy homes are being lapped up by home buyers. Here, the concept of “Build and Sell” can provide a long-term solution. Under RERA, a developer can’t start his project without land and all mandatory permissions in place. Also, there is not only a ban on funding projects through customer advances by way of pre-launching of projects but there is also a strict check on (mis)utilising funds collected from customers through the implementation of the escrow account mechanism.
As such, it makes sense for developers to adopt the “Build and Sell” model which is common in advanced countries. Leading developer DLF has already announced it would adopt this model. And, if the government organises cheap bank funding for at least developers of affordable housing, many of them will take to “Build and Sell”, to the advantage of property consumers.
Red-tapism is also proving to be a big bane of the real estate sector as the unduly long time taken by authorities in giving construction permits and other multiple sanctions adds the developers’ debt, in turn increasing home costs. And, since the sanctioning authorities do not come under the purview of RERA, there is no check on project delays due to the unduly long time taken in according project sanctions and giving completion certificates.
The ideal solution to this problem is a single window mechanism for project sanctions/clearances. Since this is not happening, the government should fast-track the process of online permissions/sanctions and make this time-bound.
Last but not the least, there should be freedom from defective and fraudulent land/property titles to make property transactions easier and safer. Thus, there is an urgent need to set up a Land Titling Authority in states to prepare and maintain a digitised registry of all immovable properties. This, together with introduction of Title Insurance for providing protection against any financial loss due to title deficiencies, will considerably help in enforcing contracts and prevent property deals from falling through, thereby effectively checking high litigation due to property ownership disputes.
The transparency brought in by this will further boost the confidence of foreign investors, thereby helping in putting foreign investment in Indian real estate on the fast track.
(Vinod Behl is editor, Realty Plus, a leading real estate monthly. The views expressed are personal. He can be reached at vbehl2008@gmail.com)
—IANS
by admin | May 25, 2021 | Business, Corporate, Corporate Buzz, Emerging Businesses, Investing, Medium Enterprise, Property, SMEs
By Rituraj Baruah,
New Delhi : For commercial real estate, developers feel the worst is over, and signs of a revival have started showing up with pent-up demand and stocks declining. The outlook for the sector, they say, is now better.
In line with the slump in the residential segment, commercial real estate too went through a slowdown in the last five years and received major back-to-back blows in the past couple of years with the coming in of the Real Estate Regulatory Act (RERA), Goods and Services Tax (GST) and demonetisation. But now, market players say, the bad phase is over.
“The demand from commercial real estate has increased with improved occupancy and rentals. The commercial real estate market has witnessed a growth due to the increased penetration of e-commerce, demand for quality workplaces and warehouses,” Amit Wadhwani, Director of Sai Estate Consultants, told IANS.
Prasoon Chauhan, CEO of NCR-based HomeKraft, was upbeat about the outlook for the sector and said: “It is expected that the coming quarters will continue to witness more commercial supply across key markets. As a result of the stricter regulations in the real estate industry, commercial real estate will continue to see healthy leasing volumes.”
Going by the current demand, it is expected that the average rent for “grade A” office spaces is likely to rise marginally in key markets and continue to attract demand, while new emerging areas will continue to witness stable rents for now, Chauhan said.
Talking about higher demand leading to decline in stocks, Vipul Shah, Managing Director of Parinee Group, expressed the view that “the vacancies in commercial real estate is at an all-time low and there is robust demand from corporate and SMEs (small and medium enterprises).”
Office space absorption is not only strong but pre-leasing is at an all-time high, indicating sustained demand and occupiers’ interest in commercial spaces, Shah said.
Another encouraging factor for the segment, developers say, is the flow of foreign investments. According to Mumbai-based Nahar Group’s Vice Chairperson, Manju Yagnik, “foreign investments are coming mainly into commercial projects” and it is felt that foreign direct investments are safer in the commercial realty than in the residential segment.
Real estate players are also hopeful of more demand coming in the commercial segment in the form of investments.
Wadhwani said: “Individuals with deep pockets are looking forward to invest in commercial real estate where the demand will only increase along with supply.”
“Because from the investment point of view, commercial probably will give you much higher return than residential at this time,” Yagnik said, adding: “Residential has become a little stagnant and probably in the coming one or two years you will see there is a better boom in commercial stocks probably than residential.”
However, Dharmesh Jain, Chairman of real estate group Nirmal, feels that “despite investment potential, commercial real estate has not remained preferred investment option”. He however added that newer markets are emerging as investment destinations for commercial and retail investments.
The market has also been supported by the confidence-building measures as a result of RERA, which initially had caused a major disruption to the market.
“Developers have become happy that it (commercial real estate) has become more organised and more systematic. It is a win-win situation for both the buyers and the developers,” Yagnik of Nahar Group told IANS.
On GST and demonetisation, which were major blows to the already laggard real estate market, Shah from Parinee Group told IANS: “GST has increased the burden but gradually customers and developers are absorbing the same in their scheme of things.” He said demonetisation was now a thing of the past.
A significant trend emerging in the commercial real estate segment which has raised hopes of better demand is the concept of “co-working spaces”. Developers feel this concept would bring in more of rental and office space demands.
In co-working spaces, organisations share office spaces with flexible time periods at comparatively lesser cost than renting a specific office space, making market players call it the affordable segment of office spaces.
Pranay Gupta, Co-founder of 91springboard, co-working space provider, described the demand in the segment as “tremendous” and said that other than start-ups, venture capital funds, non-government organisations and many listed companies work out of co-working spaces.
“You will see commercial real estate builders doing tie-ups with co-working firms and every organisation with less than 300 people is likely to move to co-working spaces,” he added.
“With technology changing so much and the cloud being available, to connect anybody, anywhere, it has become the focus of companies to allow for flexibility to their employees and to look at real estate in terms of an outsourced asset rather than an owned asset,” said Harsh Lambah, India Country Manager, International Workplace Group.
Lambah also said that in a few years, a large part of commercial real estate would be covered by the co-working concept.
Although the current trend in the commercial segment is mostly positive and developers largely see better days coming, finance and availability of land are an issue, as per the market players.
Jain of Nirmal said: “Limited accessibility of developable land in the metro cities in India adds to the existing problem of concentrated commercial development. We expect the government to develop infrastructure in emerging location, which will induce connectivity and inspire commercial investments.”
Shah was of the opinion that project financing for commercial real estate should be made more easily available and at lower interest rates.
(Rituraj Baruah can be contacted at rituraj.b@ians.in)
—IANS
by admin | May 25, 2021 | Opinions
(4th anniversay of Modi government)
By Vinod Behl,
The four years of the Narendra Modi government, marked by landmark reforms, have seen the complete transformation of the unorganised and opaque real estate sector into a regulated, transparent, affordable and consumer-friendly asset class.
Notwithstanding the global slowdown, Indian real estate’s troubles have been self-created. The sector has been bogged down largely due to lack of regulation and transparency and inflated pricing, owing to speculative operations. Over the years, the foul play by a large number of realtors played havoc with the sector. It is in this backdrop that the government put the focus on undertaking reforms to address these fundamental issues plaguing the sector.
The government’s reform and policy initiatives have been directed towards replacing the investor/speculator-driven model with consumer-centric model to ensure that residential property becomes affordable so that every Indian can have a shelter over his head. The results are there for everyone to see.
Property prices have dropped by 7-9 percent in the first quarter of the calendar year in key cities. The government’s flagship mission, ‘Housing for All’, focusing on affordable and mid-segment housing, providing 6.5 per cent interest subsidy (up to Rs 2.67 lakh) under PMAY has been responsible for enhancing affordability. GST has also provided price relief by dismantling multiple taxation and zero tax on ready-to-move homes. All these pro-consumer reforms contributed to bring homes within the reach of the common people.
For long, hundreds of thousands of home buyers across India have been facing hardships due to large-scale project delays. Especially, over 20,000 home buyers in Noida have been under great stress fearing non-delivery of homes due to the developer — Jaypee Infratech — facing insolvency.
The government came to the rescue of home buyers by issuing an ordinance to amend IBC, putting home buyers at par with lenders, thereby paving the way for refund of their money. A large number of housing projects across India are stalled due to shortage of funds, especially as bank funding has been difficult to come. But the reformed and regulated real estate has led to inflow of huge foreign investment of $114 billion between 2015 and 2017, registering a 40 per cent increase in FDI recorded between 2011 and 2014.
Together with FDI, another avenue of developer funding through NBFCs has come as a lifeline for stalled projects, giving new hope to home buyers.
The Real Estate Regulation & Development Act (RERA) has come as a big saviour for property consumers. With its stringent preventive and punitive provisions, RERA has put an end to their exploitation by unscrupulous developers by making transactions fair, transparent and secure.
The reform-oriented government gave top priority to infrastructure development by setting up the Rs 40,000 crore National Investment & Infrastructure Fund.The high priority to highways, with record construction of 25 km per day, has given real estate a connectivity boost.
All the reforms and enabling policies have contributed to the revival of real estate. The worst-hit residential realty has seen a growth of 13 percent in FY18. The commercial real estate has already seen turnaround, with a CBRE report pointing to an all-time high absorption of 11msf during the first quarter of the year, 25 percent up from last year.
The realty revival has also been possible due to turnaround in the economy, with growth bouncing back in the second half of FY18. In the last four years (FY15-18), overall growth rate in the economy showed a modest upstick to 7.3 percent compared to average growth of 7.2 percent in FY11-14.
Though the short-term adverse effects of interruption caused by reforms like demonetisation, RERA & GST have been largely contained and real estate is on the revival path, the government needs to tackle various reform challenges to fast track this process. Notwithstanding GST contributing to ease of business and marked improvement in global Ease of Doing Business Index, there is a need to put single window mechanism in place to speed up projects.
Bringing real estate under GST to derive its full benefits, bringing down transaction costs by rationalising stamp duty and collector rates, according industry status to real estate to access cheap bank funding and effective and speedy implementation of RERA, Housing for All and Smart Cities Mission are the other challenges on hand. Nevertheless, reforms have provided a much needed spring board to real estate to transform into an attractive asset class with sustained growth.
(Vinod Behl is editor, Realty Plus, a leading real estate monthly. He can be reached at vbehl2008@gmail.com )
—IANS
by admin | May 25, 2021 | Opinions
By Vinod Behl,
Two years after the Centre notified the Real Estate Regulation and Development Act (RERA) of 2016 to empower and protect property consumers and make property transactions fair and transparent by regulating the sector, the sluggish and flawed implementation of the progressive act, has put a big question mark on the gains of RERA.
RERA was passed by both the houses of Parliament in March 2016 and on May 1, 2016 a majority of the sections of the Act came into force. Under this model Act, every state was required to set up its regulatory authority within a year (by May 1, 2017). And in the next one year, the states were mandated to make their RERA websites operational for the benefit of home buyers. Other sections were notified in April 2017 and on May 1, 2017 the full act became operational.
Today, two years after RERA became an Act, only 20 states have notified rules. What’s more, except for the states of Maharashtra, Punjab and Madhya Pradesh, which have permanent regulators, all other states are making do with interim regulators.
Under RERA, all developers need to register to launch projects, which get registered only after all necessary permissions and land for the project are in place. They are required to provide all the mandatory information to be up on the official website of RERA to help buyers take an informed decision about buying property.
RERA’s performance on this front is also dismal as 15 states are without an operational RERA website. Even on the functional websites, the projects information is either incomplete or questionable, with no way to check its authenticity. As a result of the weak and faulty implementation of RERA, home buyers are deprived of the gains and protection guaranteed under the Act.
Notwithstanding the criticism about flawed and slow implementation of RERA, this progressive regulation has helped in project execution and delivery, boosting demand and sales, in turn contributing to the revival of residential real estate, though the gains are limited.
As RERA takes root — along with low interest rates, stable property prices and the government’s loan subsidy for affordable housing — its positive impact is already visible. There has been an eight per cent hike in housing demand in Q1, 2018, compared to Q4, 2017. Home sales registered a 33 per cent rise in the top nine cities during this period. In fact, housing sales exceeded new supply by five per cent during the last two years.
It’s another matter that buyers have so far not developed complete confidence and prefer ready homes to avoid development risks. The preventive and penal provisions of RERA have made developers focus on deliveries, readying a good pipeline of completed homes for sale.
Besides various other factors, fund constraint has been the prime reason for large-scale delivery defaults. But RERA, aided by other key reforms like GST, FDI liberalisation, ease of doing business and demonetisation, have brought in much-needed transparency, fair play and financial discipline by regulating realty, in turn giving a boost to the confidence of global investors.
Statistics speak for themselves. PE investments witnessed 52 percent rise since 2014. PE investments grew 17 percent in 2017 to Rs 42,800 crore, as against Rs 36,590 crore last year, with residential realty attracting highest investment of Rs 15,600 crore.
RERA, besides empowering and protecting consumers, has put grievance-redressal on the fast track. It was following the enactment of RERA that a group of aggrieved home buyers could directly approach the National Consumers Dispute Redressal Commission (NCRDC), thereby bypassing lower consumer courts to ensure fast-track justice. It is also because of RERA that the government, development authorities and the judiciary have become pro-active in coming to the rescue of aggrieved home buyers of stalled projects.
The much publicised cases of Jaypee Infratech and the Amrapali Group are cases in point where developers are facing the ire of about one lakh home buyers. In both cases, the companies are staring at insolvency and the Supreme Court has come down heavily on the errant developers, saying it is committed to safeguard the interests of home buyers in terms of project completion and refunds.
Meanwhile, it is also the result of the pressure created by RERA that home buyers are set to get relief under the Insolvency and Bankruptcy Code (IBC) as the government plans an ordinance to treat home buyers as financial creditors to facilitate refunds.
Considering the pros and cons, RERA needs to cover a lot of ground for its effective implementation, in order to serve its desired purpose. And according to Dr Samantak Das, Chief Economist, Knight Frank India Property Advisory, in the current scenario, the sentiment that drives the purchase of residential property is unlikely to change. He may sound too negative. But one thing is certain: The patchy implementation of RERA has delayed the revival of real estate, especially residential realty.
Gautam Chatterjee, Chairperson of the Maharashtra RERA, the front-runner in the implementation of the Act, believes that this “transition pain of RERA” may last at least a couple of years. And Anuj Puri, Chairman of Anarock Property Consultants, sums up the scenario well, saying that although real estate recovery under RERA will be gradual, yet it will be extremely durable — and based on very sound market dynamics.
(Vinod Behl is Founder & Editor, Ground Real(i)ty Media, a real estate content consultancy. He can be contacted at vbehl2008@gmail.com)
—IANS
by admin | May 25, 2021 | Corporate, Corporate Buzz, Investing, News, Politics, Property
By Rituraj Baruah,
New Delhi : Almost a year after the Real Estate Regulatory Act (RERA) was enacted, its implementation is still patchy, with a permanent regulator missing in most states. The result is that buyers still have not got a clear roadmap and builders continue to sell distant dreams.
Among 29 states in the country, only Maharashtra, Madhya Pradesh and Punjab have set up permanent real estate regulatory authorities so far. Jammu and Kashmir is out of the purview of the Act as the state has to enact its own law.
“Given that it is a state subject, the implementation has been quite varied,” said Pallav Pandey, Co-Founder and CEO, FastFox, an online platform for rental housing, adding that “much confusion persists on what is permissible in practice”.
According to a report by the consultancy firm Knight Frank, eight states have not even installed a regulating authority and the remaining 17 have installed “interim” regulators.
“Sadly, most states have been playing the waiting game about getting a permanent regulator after handing over the reins to such ‘interim’ authorities. What was strictly supposed to be a stop-gap arrangement has turned into a standard,” says the report.
Additionally, only 14 states and seven Union Territories have a functional portal in place and 20 states and the Union Territories have notified the rules.
The report says that Maharashtra had been among the best executioners of the Act. Over 25,000 projects have been registered under RERA across India, out of which 62 per cent are in Maharashtra alone.
“Maharashtra is the only exception where the regulator’s proactive functioning has set new precedents every second day,” the report says.
Although setting up of a permanent regulator has sorely lagged behind, stakeholders say the RERA had already caused some perceptible changes in the market.
“The Act has helped in eliminating the pre-launch projects completely from the market which had led to a price hype,” says Gautam Thapar, CEO of Delhi-NCR based Thapar Builders.
“In the past one year, the RERA Act has become a custodian of the much-required transparency and redefined rights for both of the sides. It has also helped the industry to clean up the unorganised and fly-by-night players from the market,” he added.
According to Anshuman Magazine, Chairman of India and South East Asia, CBRE: “The reform has brought about regulation and transparency into the sector, further augmenting the growth of the property market in India.”
Talking of limitations, Amit Wadhwani, Director of Sai Estate Consultants, said that RERA had not been able to curb black money in real estate yet. “Provisions regarding controlling the black money should be brought into effect, he emphasised.
He also said that builders were putting dates much ahead of their approximate completion time thus giving themselves much greater leeway in handing over projects. The regulator should take that into account and give projects a stipulated time to complete.
A major feature of the Act is that even brokers and consulting agents have to register themselves. However, this was not really happening.
“For brokers or agents, the year has been somewhat overwhelming. A number of them have refrained from registering to take advantage of the RERA opportunity,” said Shubika Bilkha, Director of Real Estate Management Institute (REMI).
She said that women who served as agents have in particular been more wary to involve themselves in this evolving framework. “It is incumbent on the industry and the regulators to ensure that these agents find their way into the structured regime,” Bilkha added.
Market players say a major obstacle in the way of boosting demand was the higher rate of Goods and Services Tax (GST) on under construction and near completion projects.
Thapar said there had not been enough impact on buying decisions for near-completion projects due to the higher GST rate of 12 per cent on them in comparison to 4.5 per cent service tax earlier.
Pandey from FastFox says the government should think of bringing the rental housing also under the purview of the Act. “RERA only covers new home sales. That is not the complete real estate,” he said, adding that 40 per cent of urban India lived on rent.
Despite the initial hiccups, most stakeholders believe that, eventually, the law would help in leading to a stable, streamlined and transparent property market. “In the long run it will bring about a better aligned structure to the realty sector,” Magazine of CBRE said.
(Rituraj Baruah can be contacted at rituraj.b@ians.in)
—IANS
