News: How 2017 kept real estate market on its toes-21.01.2018

How 2017 kept real estate market on its toes

By: Preeti Sharma

Throughout 2017, policy changes kept the real estate industry on its toes. The jury is still out whether the industry is out of the woods yet. A lot has changed in this year. While for developers, the way they had been doing business changed, home buyers felt relief as their rights are now protected, thanks to the Real Estate (Regulation and Development) Act.

Let us take a look at the policies and their repercussions on the real estate sector this year –

Real Estate (Regulation and Development) Act, 2016: The process of registering under RERA kept the developers busy throughout the past few months. As the year is coming to a close, the number of projects and developers getting registered is growing.

The Real Estate (Regulation and Development) Act, 2016 is working to enhance transparency and bring accountability in the realty sector. It also sets disclosure norms between the builder and buyer to protect their interests. Fast resolution of property disputes will also be ensured.

Till today, about 1100 projects and realtors have registered in Gujarat. About 223 housing projects have registered with Tamil Nadu RERA and with MahaRERA, more than 14000 projects have registered so far.

Benami Property: The Benami Transactions (Prohibition) Amendment Act was amended in 2016 and in 2017 the tax authorities began cracking down on the Benami assets.

So far, the income tax department has already seized 541 properties. Moreover, bank accounts holding funds of about Rs 1,800 crore are being frozen and more action is expected soon.

The government is now planning to crack down on Benami properties by making it mandatory to link Aadhaar with property transactions.

Bigger and affordable houses with PMAY and CLSS

This year, along with the year 2016, have been path-breaking for the policy of affordable housing in India. Where in 2016, affordable housing got the much-coveted infrastructure status, this year, the government focused on building more houses for EWS and LIG and also rolled out the Credit Linked Subsidy Scheme (CLSS) for middle-class buyers.
Since the launch of the Pradhan Mantri Awas Yojana (Urban), the government has sanctioned 30.76 lakh houses to fulfil its ambitious scheme of ‘Housing for All’ by 2022.

Moreover, the Union cabinet has recently increased the carpet area of houses under the government's affordable housing scheme, benefitting both builders and middle-class home buyers.

Under the MIG-I category, the carpet area has been increased from 90 sq meter to 120 sq meter and under the MIG-II segment, it has been raised to 150 sq meters from 110 sq meters.

In the next few years, we may see the middle and lower segment home buyers’ access to bigger and ready-to-move-in houses at lower costs.

GST on property

To bring down the cascading tax structure and reduce tax burden on consumers, the Goods and Services Tax (GST) was introduced on July 1, 2017, in line with 'One Nation, One Tax' model. However, in residential real estate, the service tax was 4.5 per cent but after the introduction of GST, the tax was levied at 12 per cent with no extra or hidden taxes. The issues are still being debated and the volume of input credit is yet to be reasonably computed by developers.

For ready-to-move-in properties, the tax rate is zero. This has made such properties attractive compared to the under-construction properties and is thus helping create fresh demand.

However, developers are not happy with the current rate of GST. The National Real Estate Development Council (Naredco) has recently urged the government to halve the GST rate for the real estate sector to 6 per cent to help boost demand for new homes.

Cash transactions upto Rs 2 lakh

Cash transactions of over Rs 2 lakh were banned. This has significantly reduced the amount of cash transactions that used to take place in real estate. Also paying instalments in digital transfers has now become the norm. Accounts linked to Aadhaar and Pan cards are now ensuring that all property transactions be tracked real time.