India’s real estate sector has undergone much atransformation in the last 2-3 years, particularly with the implementation of GST and RERA. In an interview with BusinessLine, Samantak Das, Chief Economist and National Director, Research, Knight Frank India, shares his views on the impact of regulatory changes on the real estate sector.

How has the implementation of GST (Goods and Services Tax) helped the sector?

Though the market is stagnant, there is a lot of improvement in the mid- and affordable housing segment of developers. This is the way forward for building a stronger real estate sector. This will make the entire demand circle sustainable. What has helped this base? GST.

GST was a restructuring of the entire tax system. The Centre’s push towards affordable housing has helped both property developers and buyers in the form of tax holiday and interest subsidies. The tax on affordable housing segment has been brought down to 8 per cent in GST. It also integrates the unorganised with the organised sector, as the developers and suppliers cannot claim input tax credit unless they are in compliance with the GST. Only then the benefits can be passed on to the buyers. It is a good move, as it integrates suppliers of cement, sand and other raw materials, which is phenomenal in terms of benefits.

What are your views on demonetisation and crackdown on black money?

It is well known that land and real estate hold a lot of black money. You can’t take the black money already invested in the economy. But at least going forward, anyone trying to deal with unaccounted money will think twice, which was not the case earlier. I look at it as a reform process, which will make the stakeholders cautious and make them think twice when transacting in real estate.

Can you share your views on the impact of the Real Estate Regulatory Authority (RERA) Bill?

RERA has a direct impact on the real estate sector. It will bring a level playing field in the sector. Previously, in the 1990s and till recently, the sellers and developers had all the information on pricing while the buyers were hardly in the loop. Information is the fulcrum of the industry.

Also, there was nothing in terms of governing these agreements between the two parties. These agreements were probably skewed towards developers.

Now, with the enforcement of RERA across the country, there is the much-needed transparency. In terms of implementation, Maharashtra is far ahead compared to others in the country and in my opinion in terms of implementation, it is among the best. When you look at Maharashtra’s RERA website, for instance, anyone who wants to buy or wants information about a project under construction can get it from that site. It provides an overview of the projects being constructed, the phase of construction, about any legal problems, past and present and even about the sales.

This gives an entirely different paradigm for all the stakeholders in the industry. Even developers have welcomed RERA. The response from the demand side has improved because of the transparency in the sector. The more transparent the sector, the more will be the fund flow; primarily due to the reduction in risks (such as execution risks).

With RERA implementation satisfactory, what is your view on the residential real estate segment, going ahead?

I would expect demand to recover completely only after the implementation of RERA across all the States. However, a word of caution is needed on whether 2018 will see a revival or not. The stage has been set for recovery in the real estate market with the regulatory dust settling down. But we have some political shocks ahead in the form of general elections. A status quo will be maintained in the sector, if not improving, at least it won’t go down. And probably, post-election, we can see some revival happening. I am a bit conservative in the sense that political impact is quite strong on real estate.

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