Recent government measures will bring in accountability and regulation to the real estate industry, affirms R SHOBHA.
The real estate sector contributes around 9 per cent of India's GDP and is the second largest employer, after agriculture. Large and with a variety of small and big stakeholders - suppliers, manufacturers, transporters, contractors, landowners, developers, financial institutions, consultants, brokers and purchasers - the sector has functioned as a loosely organised setup where diverse capabilities and interests prevent a cohesive approach. Over the years, the industry has been plagued by delays, lack of transparency, misinformation and above all, less than desirable credibility. In this background, the recent measures introduced by the government seek to regulate the industry and bring greater credibility. GST and RERA are touted as game-changers converting the unorganised sector into an organised one. There have been mixed reactions to the introduction of RERA and extension of GST to real estate.
The sector is currently in adjustment mode and the interim period will see project delays as developers put in compliant processes. However, eventually, the purchaser will be more protected and greater transparency in the sector will be visible. The confidence of homebuyers is now set to increase on the back of these sentiment-building measures of the government. We can expect greater accountability from developers in terms of financial disclosure, timely development of projects, and maintaining good corporate governance practices.
The GST effect
GST aims to eliminate the difference in indirect taxes applicable across various states. It simplifies the tax structure for developers as well as suppliers, making the process easier and faster. The real-estate sector stands to benefit from the fact that GST would provide more clarity on tax credits for real estate transactions and allowance of input credit would reduce the price of properties. Developers previously had to bear the burden of higher input costs because raw materials like cement, steel, iron rods, bricks, sand, paints, wall fittings, plaster, tiles, etc, were also charged various kinds of taxes that ranged from 20-25 per cent for most components. Therefore, indirectly, it will ensure that all parties are registered and following norms. Smaller or unorganised players will be eliminated.
What RERA brings
RERA brings greater transparency and protects the interests of buyers through the following:
About the author:
R Shobha, National Director-Project Management, Colliers, has over 18 years of experience in the field of architecture and project management. She is currently responsible for the PM business across India.