DeMO, GST Stagnated Realty Growth, Now Time For Course Correction by Govt-Divakar-DNA Ventures
--By Divaker Bhalla, CEO- DNA Ventures Pvt Ltd
Real estate plays a dominant role in the country's economic prosperity. Presently contributing 6-7% to the nation's GDP, the sector in India is said to achieve the one trillion USD market size by 2030, which will be equivalent to 10% of GDP. However, the real estate industry has incurred heavy blows during the last decade be it demonetisation or the introduction of the GST even now the pandemic. All of these along with several other factors have slowed and stagnated the industry's growth.
On the bright side the industry now is showing signs of bouncing back. Realty developers as well as customers are eager for the market to resume and looking forward to business. The government as well has shown keen interest in reviving the real estate industry with its announcement of the ₹20K crore development financial institution (DFI) for developers under the National Bank for Financing Infrastructure and Development (NaBFID) Bill, 2021.
It is projected that the Indian economy will contract 7.7 % in FY 2020-21, and better steps by the government can definitely boost the key industries and the economy.
In June, 2020 FM announced a window for Rs 20K crore to boost the incomplete affordable housing projects. This announcement revived many developers and realtors' hope of getting back on track. But there has been no development in this area. Although while unveiling the union budget 2021-22, the FM reassured the industry of the government's promised aid, she also announced in March that the NaBFID Bill, 2021 has been passed by the Parliament and the infra-DFI is being established as a statutory body.
The RBI last year announced cuts on its repo rate and the industry players were expecting some more rate cuts this year, but the apex Bank decided to keep its key policy rates unchanged. There can be different effects of these rate cuts on the real estate industry, but one important effect it will have on the borrowing rates of the banks is definitely going to impact the buyers mindset on getting a new home. Reduction in interest rates and EMI will definitely encourage buyers to buy a new property.
The government should intervene in the early resolution of disputes between developers and buyers. The government should also act in a way that reduces overlapping jurisdiction and increases builders' accountability when projects are reconfigured and a new developer takes over. There are many projects from various builders which were tagged incomplete and the investor’s confidence on these project projects went down. This meant that the project, land and the buyers were stuck and there was no way forward but for another developer to take over. But this would also mean layers of legal and financial complexities and developers were shying away from that. This is the case with many other stuck projects throughout the country and the government should intervene and ease the entire process.
Another key aspect of the industry is the construction process and construction material isn't cheap. Reduced demand along with the inflation prevailing in the country have given the construction costs even higher, and realtors were expecting a uniform GST rate on construction material in place of the scattered and all-over-the-place GST rates. This would definitely help reduce the cost of construction. And in turn would encourage realtors to focus on other aspects like the time punctuality of their projects as well as safety of the workers and of the future residents.
The central government should announce the rolling out of prepaid health cards for construction workers. The implementation is another subject altogether but providing affordable and low cost healthcare services to construction workers is also important. Majority of the construction workers in the country are migratory; they're not even registered with the labour department, let alone be provided with better health care services. But one thing is for sure, that providing low cost healthcare services to construction workers will definitely boost their morale and overall health and will also coincide with the growth of the industry in general.