Landmark Reforms like GST and RERA Setting the Tone for the Real Estate Market in India

In 2017, the Indian real estate market witnessed two major reforms – the Goods and Services Tax (GST) and the Real Estate Regulatory Authority (RERA). While GST is estimated to have far-reaching impact on various sectors across the economy, the implications for the real estate sector can be a mixed bag. Over the next few months, GST will unfold the total construction cost. However, the ‘Housing for All by 2020’ project under the Pradhan Mantri Awas Yojana (PMAY) has been excluded from the purview of the GST.

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For under construction properties, the Indian Government has permitted one-third of an apartment cost to be deducted towards the transfer of land. The GST that needs to be paid on the outstanding amount is 18%, which brings the effective GST rate on under-construction properties to 12%. The occupation cost is expected to rise up as the 15% service tax has been replaced with an 18% GST. You may feel that GST works best in a planned economy where the supply chain is structured and value additions are clear. But, the implementation of GST might be the first step towards the country’s economy becoming organized. In the long run, the benefits will trickle down to make his reform better for businesses in India. GST will help logistics industries achieve supply chain efficiencies, leading to consolidation in the warehouse segment and entry of credible industries. The increase in cost of cement will be passed down to to end-users. Real estate companies will also gain from the ITC on raw materials used for construction. As a whole, GST will reduce the compliance cost and improve the convenience of doing business in India. RERA Act was first introduced on 1 May 2017. It was passed to ensure accountability, transparency, and uniformity in real estate prices. This reform has been implemented in 18 states and all union territories, out of which, only 11 states have an active online portal. 10 states are yet to adopt RERA rules. RERA was put in place to increase transparency, address consumer complaints, and help in rejuvenating residential demand.
Real Estate Trends in 2020
Due to the advancement of technologies like data science, artificial intelligence, big data, and so on, the back-end businesses are becoming completely automated. Moreover, data analytics are being adopted increasingly to determine how technology can be used to enhance business operations.

The past two years have not only adopted numerous legislative measures, but also glorified the ‘Affordable Housing’ concept. Initiatives like granting infrastructure status to affordable housing, 100% deduction on profits for affordable housing projects, increasing the habitable area of units, and flexible completion timelines have been taken up.

Delhi NCR and Mumbai have been at the core of retail activity, but lately Bangalore, Hyderabad, Chennai, and Pune have also witnessed robust retailer interest. The southern cities like Bangalore and Chennai are expected to see a strong supply – 30% in the overall retail stock by 2020.

The government’s initiatives to organize the logistics ecosystem has resulted in India ranking 35 out of 160 countries on the 2016 World Bank’s Logistics Performance Index. With the government interested in giving manufacturing the long deserved thrust, it is estimated that demand from the segment will pick up.

The warehousing sector will be dictated by domestic demand and be governed by regional opportunities. The 2 reforms will have a bearing on real estate sector. The risk associated with Indian real estates will reduce due to leading and trustworthy developers. Over the years, this sector will become more organized and attract wider funding avenues.