The past decade under the Modi government witnessed significant developments in India’s real estate sector, with noteworthy policy initiatives and transformative changes. While strides were made in promoting affordable housing and implementing crucial regulations, some areas faced challenges, notably the rental housing market.
Policy Hits:
- Affordable Housing Push: The government’s commitment to affordable housing, epitomized by initiatives like Pradhan Mantri Awas Yojana (PMAY) and the credit-linked subsidy scheme in 2015, has notably addressed the demand for low and mid-cost housing, fostering growth in the real estate sector.
- RERA Implementation (2016): The introduction of the Real Estate Regulation and Development Act (RERA) in 2016 stands out as a significant positive. This regulatory framework aimed at enhancing transparency, safeguarding homebuyers’ interests, and instilling accountability among developers.
- Recognition of Homebuyers in IBC (2018): The inclusion of homebuyers as financial creditors in the Insolvency and Bankruptcy Code (IBC) in 2018 empowered them in insolvency proceedings, ensuring active participation in decisions affecting project outcomes.
- Demonetisation and Digital Transformation: The 2016 demonetisation initiative had profound effects on the real estate sector, curbing the use of unaccounted funds and acting as a check on price hikes. The subsequent digital push aligned with the government’s aim to promote transparency in transactions.
- GST Implementation (2017): The rollout of Goods and Services Tax (GST) in 2017 streamlined taxation in real estate, fostering a unified tax structure and promoting transparency, despite initial disruptions.
Implementation Challenges:
- Delayed RERA Implementation: The slow and uneven adoption of RERA across states created inconsistencies, hampering its expected positive impact on the real estate sector. Inadequate uniformity diminished the regulatory framework’s effectiveness in providing timely relief to homebuyers.
- Unresolved Project Delays and Defaults: Despite regulatory measures, persistent project delays eroded trust in the sector, highlighting the need for a robust mechanism to swiftly address and resolve such issues.
- Lackluster Approach Towards Rental Housing: The real estate sector’s failure to address the needs of the rental housing market through targeted policies and incentives remains a significant gap, leaving many without viable and affordable housing options.
- Industry Status Absence: The non-recognition of real estate as an industry in India has impeded growth, limiting access to institutional funding and tax benefits. This hampers large-scale projects and exacerbates affordability issues for developers and homebuyers.
- Rationalization of Overhead Expenses: Despite reductions in GST, additional charges such as stamp duty, registration fees, and legal expenses contribute to a substantial increase in the overall cost of property acquisition. Calls for GST removal or stamp duty rationalization persist, but substantive changes are yet to materialize.
In reflection, the Modi government’s tenure has seen pivotal steps in reshaping India’s real estate landscape, but addressing persistent challenges in implementation remains a priority for sustained growth and inclusivity in the sector.
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