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Real estate has Nothing to complain

By D Govardan 

India’s real estate sector has the least to complain against three years of the Narendra Modi-led NDA government at the Centre. In this period, this government has introduced far more initiatives for the benefit of this sector, than ever done in the past.

There have been a slew of measures, which include the Real Estate Regulation Act (Rera), implemented from May 1, 2017, changes to real estate investment trusts (Reit) and the Land Acquisition Act, offering infrastructure status to affordable housing and 3-4 per cent interest subvention schemes for low-income groups, in addition to the proposed Smart Cities.

“The Modi government has been proactive in terms of aiding and streamlining the real estate sector. Populist short-term measures have been avoided, and long-term policy changes have been boosted. Today, policy-level initiatives like GST and Rera are a reality and their benefits will become evident,” says Anuj Puri, chairman, JLL Residential (JLLR). “Bottlenecks in Reits have also been removed and the government has accorded the affordable housing sector with much-needed infrastructure status,” he added.

Said Anshuman Magazine, chairman, India and South East Asia – CBRE: “Most, if not all of these initiatives have been aimed at bringing in transparency in the sector, boosting the confidence of consumers and developers and encouraging capital inflows from institutional investors. The focus on affordable housing is expected to provide further impetus to the segment. With all these reforms in different stages of implementation, we are already seeing green shoots of recovery in the sector, especially in the residential real estate segment.”

Some like Siddhart Goel, senior director, research services, Cushman & Wakefield India, say that the real estate sector is a major employment generator and a contributor to the GDP.

“This government has looked at the larger prism, not as a microscopic focus on a few issues. While previous governments had at the most offered only a subsidy or interest subvention of only one per cent, this government in January 2017 raised this to four per cent and also brought in specific changes to its affordable housing policies. It was focused on fixing the system and bringing in accountability, which addressed gray areas that ruled the sector,” he explains.

Still, there are issues that need to be sorted out for the welfare of all stakeholders concerned. The Centre, for instance, needs to find a way to get state governments on its side to implement reforms, especially with Rera in place. “In the case of Rera particularly, the government must ensure that no state government is allowed to dilute the rules put forth by the central government and that this law is adopted in letter and spirit,” points out JLLR’s Puri.

Experts agree that while initiatives are likely to change the way real estate works in India, more clarity is needed at various policy levels. “The key issue remains timely implementation of reforms. A couple of more changes that will help the sector to grow include fast approval process, single window clearances and land digitisation,” says Surabhi Arora, senior associate director, research, Colliers International India.

The interest subvention scheme for affordable housing is also likely to boost the segment in the long term.

Availability of ‘right priced’ land parcels for affordable housing projects closer to the cities to cater to the lower-income groups in the urban markets, is another area that needs to be addressed with the support of state governments, say sectoral insiders.

The Pradhan Mantri Awas Yojana (PMAY), a flagship scheme promoted by the government, has received every encouragement possible to enable private participation in the development of affordable housing. “With infrastructure status being accorded to it, we are already witnessing interest from private developers to get into this particular segment, as they will have access to lower cost credit for longer tenures, which should improve the cash-flows of their projects. I believe that in the long term, this segment will see positive traction,” said CBRE’s Magazine.

Looking at the high demand and various incentives, a number of developers are foraying into the affordable housing. However, availability of land remains the critical issue. “The high prices of land in city centres make it unviable to build affordable housing near employment hubs, while the areas where affordable housing is visible as a business proposition, lack infrastructure and connectivity,” pointed out Colliers’ Arora.

Manju Yagnik, vice chairperson of the Mumbai-based Nahar Group, believes Rera has certainly pointed the real estate sector in the right direction.
“But it’s only after we have walked down that road and regulated each of its aspects practically, will we understand if more work is needed to hit the target and address shortcomings, if any,” she stated. She has got a point.

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