Saturday 20 June 2015

Real Estate Sector | Steps taken

Following are the key steps taken by the govt last year for the real estate sector:

  1. The Land Acquisition, Rehabilitation & Resettlement (LARR) Act
    • Amendments because it was thought to be discouraging private participation in land acquisition due to the stringent consent clause
      • Proposal of several amendments relating to consent of affected families, definition of affected families and categories of projects that can be classified as of national importance. 
    • Current status: Stiff opposition in RS, where the ruling party lacks a majority. 
      • The Bill is currently referred to a select committee, which will come out with its suggestions in the first week of the monsoon session that starts in August.
  2. Real Estate Regulatory Act (RERA)
    • IN real estate sector there is no regulator to create rules, enforce them and protect the rights of consumers. 
    • The Bill that has stringent clauses to curb the siphoning-off of a particular project’s funds, rampant construction delays, failed to address the issue of delays from the approving authorities. 
    • The Bill, prepared by the Housing and Poverty Alleviation (HUPA) Ministry in 2013, faced opposition from the developer community and could not be passed. 
    • Current status: The Bill has been revised to relax some of the developers’ concerns. Once enacted, this Bill has the potential to radically enhance the transparency of the real estate sector, thereby helping attract more foreign funds and domestic institutional investments. Referred to Select Committee
    • Challenge: Approval authorities are still outside the ambit of the Bill, which is not a positive sign. 
      • Many times, delays in construction or cost escalations are directly associated with the delay of approval authorities in sanctioning intimation of disapproval permissions. 
  3. REITs and Infrastructure Investment Trusts (InvIT)
    • The Real Estate Investment Trusts (REITs) and InvITs invest funds, pooled from various investors, in specific projects and they offer an alternate source of funding, which is also cheaper, for real estate and infra projects. 
    • It is expected to result in greater institutional participation to enhance professionalism and transparency in these sectors and provide long-term funding for debt burdened companies in the real estate and infrastructure space. 
    • It also provides an exit opportunity for many cash-strapped developers/investors. 
    • Current status: The government announced the commencement of REITs in India in its first Budget in July 2014. Debates over issues such as tax treatment are also going on. 
    • Challenges: While Dividend Distribution Tax is one of the key challenges, current rent yields are not very attractive compared to risk-free investment options such as G-Sec bonds. 
    • Outlook: Since majority of the hurdles have been cleared, launch of the first REIT in India by the first half of 2016. 
  4. Goods And Services Tax 
    • Unlike in the current set-up, where indirect taxes on manufacturing and selling activity is applied at multiple levels — excise duty, services tax, sale / value-added tax, customs duty — GST will subsume all existing indirect taxes into one uniform rate that will be applicable across all parts of India. 
    • Not only will this make the process of taxation more simplified, but it will also have a favourable impact on economic activity. 
    • Current status: GST is expected to become a reality in April 2016. As of this date, the most delicate issue of revenue sharing between the states and the Centre is being worked out.
[Source: Indian Express]


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