How the real estate transformed in 3 years of Modi govt

by Tuesday, May 23rd, 2017

Economic growth in India improved modestly after the NDA government led by Narendra Modi came to power. The slew of reforms undertaken by the new dispensation not only renewed optimism but also put the economy on fast-track.

modi housingToday, India’s economy is ranked the third largest in Asia and seventh largest globally. Though, agriculture remains a key contributor, the real estate sector is set to emerge as a gamechanger, generating businesses worth multi-crores and creating lakhs of jobs.

The realty estate has been unregulated, unorganised and disoriented for years. However, it will soon become fair and transparent across the country owing to series of corrective measures undertaken by the government.

The Real Estate (Regulation and Development) Act is already in force, demonetisation has hit the grey realty market hard, GST is set to cut down the irregularities further. And, when the government clears Benami Transactions Act, it will be body blow to all the illegal practices and will finally purge the sector of all the ills plaguing it.

Other reforms in the sector include the Real Estate Regulation Act (RERA), Real Estate Investment Trusts (REITs) while key missions include Housing for All, Smart Cities, AMRUT (Atal Mission for Rejuvenation and Urban Transformation).

Currently, the commercial real estate activity in India is heavily focused in the tier 1 cities of Bangalore, Chennai, Delhi and Mumbai due to better availability of resources and infrastructure. With these regulations in force, a fair and transparent realty market will soon spring up across the country.

RERA and Realty correction

The much-awaited Real Estate Act, RERA, which came into force on May 1, regulates the unorganised real estate sector with fair, transparent transactions that not just protect the interests of consumers but also boost the confidence of investors.

Worker climbs up to a pillar of an under construction metro pillar in KolkataThe purpose of this legislation is to protect home buyers and encourage genuine private players. Real estate players have also welcomed the implementation of the Act, saying it will bring a paradigm change in the way the Indian real estate sector functions.

The Minister said the law will make “buyer the king”, while developers will also benefit from the increased buyers’ confidence in the regulated environment.

The developers will now have to get the ongoing projects that have not received completion certificate and the new projects registered with regulatory authorities within 3 months from tomorrow.

Under the rules, it is mandatory for the states and UTs to set up the authority.

The Indian real estate sector involved over 76,000 companies across the county.

Some of the major provisions of the Act, besides mandatory registration of projects and real estate agents, include depositing 70 per cent of the funds collected from buyers in a separate bank account for construction of the project.

This will ensure timely completion of the project as the funds could be withdrawn only for construction purposes.

The law also prescribes penalties on developers who delay projects. All developers are required to disclose their project details on the regulator’s website, and provide quarterly updates on construction progress.

Real Estate slated for big growth

The Indian real estate market is at a stage where it can only rise as home prices have come down by 15-20 per cent in the last year-and-a-half due to corrections.

dda housingAs per the recent report of CLSA India Pvt. Ltd., in the next seven years, there will be an investment worth $1.3 trillion in the housing sector. The report also states that the real estate sector is expected to witness the construction of 60 million new homes between the year 2018 and 2024 having direct, indirect and induced effects on the development of over 250 other ancillary industries such as cement, steel, paints, etc.

Also, the long-term financing at lower rates will reduce the costs of construction for developers allowing them to pass on benefits to consumers. Infrastructure status granted to the affordable housing along with other tax sops would give a fillip to the market as such projects would now be able to attract investments from institutional, pension and insurance funds and external commercial borrowings at attractive rates.

Home loan rates at all-time low

In last few years, the home loan borrowers are the most relieved lot. The home loan rates are at all-time low, thereby making purchase of property much more affordable.

new-rs-500-notesAnd, it has been possible because of passage of the Real Estate Bill, demonetization, subsidy on home loan interest along with focus on affordable housing.

All this has resulted in revival of the real estate sector to some extent.

Along with lower home loan rates (which have come down to 8.3%-8.5% currently as against 10.5%-11% 3-4 years back), residential property has also become more affordable now, making it a double bonanza for homebuyers.

Moreover, the new home loan borrowers would also benefit from government’s interest subsidy scheme. Home buyers can avail 2 new interest subsidy rates of 4% and 3% for loan amounts of up to Rs 9 lakh and Rs 12 lakh, respectively, under the Prime Minister Awas Yojana (PMAY).

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