Industry Status Setting the Stage for the Real Estate Sector

Posted on 17 Mar 2017


‘Transform’, ‘Energize’ and ‘Clean India’ have been the slogans that has sprung out of the recent Union Budget 2017-18. With a huge push given to affordable housing, there has been a strong overhaul in the government’s vision of ‘Housing for All’, a much welcomed and needed boost for the housing segment.
 
The government’s decision to qualify and identify the real estate space as an industry sector has set the stage for the realty industry to economically flourish and come to the aid of the both the developer and the land owner. A great encouragement for the developers will see status quo easing access to institutional credit and reducing the developer’s cost of borrowing for affordable housing projects.
 
The status will further simplify the approval process for affordable projects, that would help create clear guidelines and increase transparency in the segment. The segment would also be made accountable to the Real Estate Regulatory Authority, that would, in turn, attract debt and pension funds to be invested in the affordable housing segment.
 
Coming in as a major relief for housing developers, the time for calculation of notional rental on unsold stock held by developers for tax purposes will now kick in only one year after completion. The industry has been further strengthened by the Finance Minister’s allocation of Rs. 23,000 crores towards Pradhan Mantri Awas Yojana, with a substantial increase of 53% from last year.
 
For Investors, the good news is the announcement of the reduction in the holding period from gains obtained from an immovable property for long term capital. The holding period which stood at 3 years earlier has now been reduced to 2 years, which will as a result implicate lower tax liability and will also boost individual investment in the sector. The Government has targeted to build up to 1 crore houses by 2019 for the homeless and those living in kuchcha houses.
 
Credit offtake towards the affordable housing segment will lead to the creation of supply which will be of great advantage for first time home buyers, thus enabling developers an access to cheaper funding. The ‘Industry Status’ will enable banks to facilitate more funding facilities leading to larger access to funds.
 
With an already announced subsidy scheme for first-time buyers, the reduction in the cost of borrowing will aid both home buyers as well as developers. The status also hints government allocating land parcels specifically for the sector in major urban centres of India. The provision has led to the realisation of many First-time home buyer’s dreams, as more than 100 million houses across India will now be a reality.
 

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