Real Estate Policy Development in 2017 That Will Benefit Buyers In 2018
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POLICY DEVELOPMENT-REAL ESTATE-BUYER BENEFITS

The Year 2017 started off with many policy changes that were made in 2016. The activity of research, analysis, consultation and synthesis of information to produce recommendations and also involving an evaluation of options against a set of criteria used to assess each option has paved way to  retro respective policies. Some of such policies are establishment of Real Estate Regulatory Authority (RERA), Real Estate Investment Trust (REIT), GST revision on Construction, regulation in Insolvency and Bankruptcy Board of India, The Benami Transaction Act and so on.

The Real Estate Regulatory Authority (RERA)

  • RERA was established in March 2016 enhancing Transparency and Accountability in the real estate system
  • With all the major states starting to approach the deadline to implement their versions of the RERA Act, the Developers and Builders have registered all the major construction projects
  • End user activism is a positive sign and will bring confidence in distressed ongoing construction projects
  • The process of RERA had kept the Builders and Developers busy revamping the regulatory frame work, home buyers gave a sigh of relief witnessing RERA Act coming up to protect their rights

Real Estate Investment Trust (REIT)

  • A real estate investment trust is a company that owns, operates or finances income-producing real estate. REIT often trades on major exchanges like other securities and provides investors with a liquid stake in real estate
  • Co Working Commercial Office Spaces are emerging in the market and REIT aims in investing in such properties because of the rental yield in the asset class. This will attract the Buyer in terms of investing in shared work spaces
  • The National Housing bank has allocated huge budget for Affordable housing to bridge the gap between rich and poor. The Foreign Direct Investment has been eased and will attract potential REITs to invest on such projects
  • Involves less risk for the Buyer as REITs invest on income and rent generating properties providing benefit for diversification. This will have positive implications for real estate across segments, namely residential, commercial, retail and hospitality
  • The introduction of REITs will provide access to capital markets for income-generating real estate, creating a new financial asset and providing an exit option for those developing these assets

Insolvency and Bankruptcy Board of India

  • The Insolvency and Bankruptcy code aka IBC was established in 2016 to find a time bound resolution to ailing organization’s either through closure or revival  while protecting interest of creditors
  • The Code was amended, Insolvency Resolution Process for Corporate Persons, dated 16th August 2017 to prevent unscrupulous persons from misusing or vitiating the provisions 
  • This Act provides the procedure of raising claims by creditors other than operational and financial creditors thereby providing a legitimate status to the claims of creditors other than the ones provided under the Code
  • The Code will ensure that anyone acquiring an insolvent asset does not become ineligible under the law to offer a resolution plan for another asset and thus saving money of Homebuyers

The Benami Transactions (Prohibition) Amendment Act

  • Benami transaction is defined as a transaction or an arrangement where a property is transferred to or held by a person and the consideration for such property has been provided or paid by another person and the property is held for the immediate or future benefit, direct or indirect, of the person providing the consideration
  • To eradicate these dishonest transactions the Ministry of Law and Justice introduced The Benami Transactions (Prohibition) Amendment Act, 2016 an act further to amend The Benami Transactions (Prohibition) Act, 1988
  • The Amended Act will eradicate the provision of secret profit made, fraud on the creditors and evading taxes
  • The amended bill seeks to establish four authorities, to conduct inquiries or investigations regarding Benami transactions by an Initiating Officer, Approving Authority, Administrator and Adjudicating Authority
  • The practice of adding the correct name to the property transacted will bring transparency in the residential markets. With increased transparency, title risks will reduce, thereby, boosting buyers’ confidence.
  • It will also increase professionalism and the tag of corruption and unaccounted wealth, which follows most developers  will hopefully be limited to a few unethical players

Impact of GST and Aadhaar

  • With significant amount of cash transactions in construction and real estate industry the Govt. of India has banned cash transactions more than 2 Lakh and making digital and online transfers a norm. All the property  transactions are being monitored with PAN and Aadhaar linked to the to the respective accounts
  • The Center has lowered the rate of Goods and Service Tax for property purchases from 18% to 12% bringing cheer to the Buyers. From the perspective of Buyer not just RERA will bring the transparency and Accountability but bringing Real Estate within the ambit of GST should reduce the burden of Tax payable at the time of buying

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RealDocs Team