Government plans to restructure the infrastructure – Jain heights

The Union Budget of 2017 has been promising so far, it continues the economic reforms, control inflation, and prudent fiscal management. Moreover, it provides little impetus in the short term for the real estate sector other than just a boost to the affordable housing segment.

The infrastructure status on affordable housing and tax relief for real estate developers are getting to see the positive steps, however, this is not going to help short term sales. The government has provided up to Rs 12,500 income tax benefit to individuals, this is insufficient to provide the demand side push to the sector.

So here are few Budget proposals that we like to bring to your notice that brings the influence and the realty sector going ahead – 

1) Infrastructure status to Affordable Housing, the boost for affordable residential sector

The impact of Union Budget 2017-18 has granted the much-demanded ‘Infrastructure’ status to the affordable housing. This decision is well aligned with the government agenda of ‘Housing for All by 2022’. Also, this will allow easier access to capital for developers, at a lower rate with a longer amortization period.  This eventually allows developers access to viability gap funding and the tax incentives. For the affordable housing purpose instead of the built up area of 30 and 60 sqm, and the carpet area of 30 and 60 sqm will be counted. This will, however, apply only in case of municipal limits of 4 metropolitan cities, while for the rest of the country including the peripheral areas of metros; the limit of 60 sqm will apply.

The time period for such projects has been extended from 3 to 5 years by the government. Most buyers of affordable housing got a boost with the announcement of interest subvention, 4% and 3% on loans up to INR0.9 million (USD13,318) and about INR1.2 million (USD17,758), respectively. The proposed deduction of the IT rate to 5% for taxpayers below the income level of INR0.5 million per annum (USD7,400 million) will increase the disposable income of the common man which will, otherwise, raise spending power and increase investment in the affordable segment.

2) 10 million homes to be built by 2019 for the homeless and those living in kutcha houses:

Home for all is the concept, making the basic needs of life come alive. To stimulate the rural housing sector in India, about INR230 billion has been allocated under the Gramin Pradhan Mantri Awas Yojana (GPMAY). This began in the motive of promoting affordable housing not only in cities but also in rural areas.

At present the housing sector is active mostly in Tier-I and Tier-II cities in India; so this scheme will not only provide necessary housing to the poor but also promote the residential sector in other rural areas.

3) Tax breather for notional rent income on unsold, unoccupied or completed projects

At present, most houses that are unoccupied after getting completion certificates are subjected to tax on notional rental income. Builders for whose constructed buildings are stock-in-trade, the rule will be applicable only after one year of receiving the completion certificate from the government. The law will provide some breathing time for developers to liquidate their inventory; this indeed takes the pressure off their shoulders.

4) The National Housing Bank (NHB) will refinance individual housing loans of about INR200 billion (USD3 billion) in 2017-18

The demonetization drive almost coming to an end that started in 2016 has resulted in surplus cash within the banks; allowing major banks across the country to lower their lending rates.

The decrease in lending rate will be welcomed by not only new homebuyers but also will be a reason to rejoice for homebuyers who have already taken a flexible housing loan. This refinancing scheme from the NHB will improve the sentiment of current homeowners, for those subjected to high lending rates in the past.

5) Foreign Investment Promotion Board (FIPB) is under abolition

Lately, in the last two years, the government has implemented many reforms to encourage Foreign Direct Investment (FDI) in India.  In fact, more than 90% of the total FDI inflows currently take place through an automatic route; hence the government has decided to do away with the FIPB in 2017-18.

This is in conjunction with the government’s understanding to further liberalize the FDI norms and attract foreign investors. Under this automatic route for FDI, all foreign investors will not require any prior approval from the FIPB and will only be subject to laws defined for each sector accordingly.

So the bottom line, it was indeed a positive budget for the sector and the government has done great to create awareness for the need to increase tax compliance. However, demonetization was a temporary strike at the economy and it may bounce back anytime sooner.

The RERA implication in the Real estate industry and its impact on customers and developers - Jain Heights

One of the most significant regulations is that the Real Estate Regulatory Act (RERA) has been preparing for some serious changes in this sector. RERA aims to bring in a regulated system for sector’s growth, be it for the developers or for consumers.

The only thing that is static is the change, this remains a very famous saying and currently, every stakeholder in the real estate sector agrees with it. This sector witnessed significant regulatory changes in the recent past that are poised to define the future of the sector.

According to study, it is evident that the sector will be heading towards forming a more transparent, competitive, value offering, hassle-free and definitely consumer-focused environment. Though these appear very promising in the whole, but the execution is what will define the actual course of these changes.

RERA, undoubtedly, has been the biggest reform till date, which has come in real estate sector recently. The announcement of this law has received mixed reviews both from developers as well as home-buyers. This act has precisely encapsulated the features to safeguard the interests of homebuyers completely but in doing so it has also proposed certain changes that may likely impose to financial challenges on the developers’ side. Jain Heights believes in promoting transparent transactions and documentation among its customers to have a very loyal database in future days. Having done many successful projects in the modern times, we are always looking forward to building a better tomorrow in terms of service and quality of our offerings with respect to the current scenario.

For example, RERA prescribes that every project needs to be registered with the Authority disclosing all relevant information and documentations pertaining to the property, like the details of promoters, sanction plans, the number of units with carpet area, etc. This is ensured and followed as developers by us to practice safe and legal business and we thereby do not commit beyond their reach and are accountable to what we have committed during the actual sale proposals. This is done in order to safeguard the capital of the consumer and ensure that the project does not get delayed. Commitment on Carpet Area states that a homebuyer has to pay only for the actual useable area and not as per super-built up area is what is currently being followed. Moreover, this will clear the intentions with respect to what a homebuyer is paying for and make their transactions transparent.

One thing that is clear from the government with the introduction of the act is to make sure that the projects are delivered on promised time. This incident has however missed addressing one major hurdle in the path that accounts for the delay in sanctions and plan approvals. It is to be noted that all delays are not from developer’s end. The sanctioning and approving team play a major role and thus need to be brought under its ambit if government genuinely chose to achieve its goals. The bottom line here is that the state government has the opportunity to amend the act, if they look at developers in the same priority as customers do, this will eventually lead to the successful execution of projects.
This overall scenario is looking good for the medium in the long run for businesses and consumers. But on the short run, this would mean a lot of transitional difficulties for businesses. It would literally spell doom for a lot of developers and the market would witness lot more consolidation.

Check for more trending and interesting articles on www.jainheights.com