Homing In
Real Estate

Homing In

With a resurgence of political will in India has come the formulation of several policy initiatives catering to the Indian real estate sector, says RAMESH NAIR.

As the government gradually rolls out various initiatives to shore up the real estate sector, we hope that the industry will benefit, and the residential markets will show a revival similar to what the commercial markets are already displaying. Some of the noteworthy initiatives which are prompting this change are:

´Housing for All´ by 2022
Affordable housing has always been a key concern for India, with the country facing a shortage of 18.78 million urban homes. The ´Housing for All´ initiative launched within five months of the Modi Government assuming office was undertaken with the objective of bridging the existing housing gap by 2022. Infrastructure status has been accorded to the affordable housing segment in the Union Budget for FY2014-2015. This will help lower costs for the suppliers of residential real estate.

Moreover, increase in the limit of individual loans for affordable housing from Rs 25 lakh to Rs 65 lakh (in metropolitan cities) and Rs 50 lakh (in other cities) has been approved. This move will give a strong boost to the demand side. The challenge for affordable housing, which remains to be addressed, is better infrastructure connectivity to make affordable areas truly habitable.

Make in India
The objective of this government initiative is to provide employment to the growing number of semi-skilled youths from rural India. It is expected to strengthen India´s manufacturing sector, which currently accounts for less than 30 per cent of the economy. For the real estate markets, we could see an increase in the space taken up by manufacturing companies.

Until now, the IT and ITeS sector has dominated space off-take in the commercial markets, and it would do the industry a lot of good to get a wider demand base. The real estate markets of cities like Pune have earlier shown a strong resilience to economic downturns due to multiple demand drivers (IT and ITeS, manufacturing, as well as a strong student community demanding residential spaces).

Goods and Services Tax
With GST, there will now be a common tax structure, and this will simplify the process of taxation. It will also have a favourable impact on economic activity, as with increased tax transparency, India should perform better on the ´ease of doing business´ matrix. Market sources suggest a well-designed GST tax regime could help lift the economy by around 2 per cent YoY.

For the real estate sector, it indicates the growth of key logistics hubs across the country. Warehousing as a market segment, is also expected to see a boom. The Union Cabinet has now approved the setting up of the GST Council, which will finalise the design of GST. All in all, it will be a huge positive for the industrial as well as commercial real estate sectors.

Smart Cities mission
The government initiative to identify 100 Smart Cities has been undertaken with a view to provide employment to a large number of residents. Cities can be developed based on their core competence in specific economic areas and promote those aggressively. It also aims at developing technologically ´smart´ urban centres with adequate institutional, physical, social and economic infrastructure to attract professionals and investors. The core infrastructure elements in a smart city would include adequate water supply, assured electricity supply, sanitation (including solid waste management), efficient urban mobility and public transport, affordable housing (especially for the poor), robust IT connectivity and digitalisation amenities. The Smart City project will see the mushrooming of efficient commercial and residential real estate in these cities.

Special Investigating Team for black money
Launched within one month of the BJP assuming office, the objective of this scheme is to bring black money into the ambit of tax authorities. The success of this scheme is expected to impact real estate, as a lot of black money finds its way into these markets in India. The conversion of black money to white will not only curb corruption, but also help to reduce property stockpiles, thereby reducing prices.

Commencement of REITs
The BJP government announced the commencement of REITs in India in its first Budget in July 2014. Debates over issues such as tax treatment for Indian REITs are still on. The authorities are now looking at the concerns, and trying to resolve them, to make the business of REITs viable for developers, investors and other stakeholders. In Budget 2016, the government removed dividend distribution tax (DDT) on REITs. This is expected to offer commercial developers a liquidity option and retail investors an opportunity to participate in the office realty market´s growth.

Model Shops and Establishments Regulation Act
The Central Government has cleared the Model Shops and Establishments (Regulation of Employment and Conditions of Services) Act 2015, that promises to revolutionise India´s retail industry and improve ease of doing business in the country. It will allow all public amusement establishments with at least 10 employees - such as restaurants, local markets, shopping malls and movie theatres - to operate 24 x 7. This Act will have to be implemented by all states. Once implemented, offline retailers operating in local markets or malls will stand to benefit hugely, as the Act brings them on a level-playing field with online retailers (who operate round the clock).

FDI initiative
With the real estate industry facing a slowdown during the last two to three years in terms of foreign capital, the ruling government had in November 2015, relaxed FDI norms by removing two major conditions related to the minimum built-up area as well as capital requirement. According to JLL data, PE funds invested close to $3.1 billion in real estate projects and/or companies across 75 deals in 2015. In the first-half of 2016, the amount stood at $2 billion across 49 deals. It is expected that the positive investment momentum shown by these funds will continue well into the second-half of 2016.

About the author:
Ramesh Nair is COO & International Director, JLL India, and is also the Managing Director for JLL´s Western India region. He is also a Non-Executive Director on the RICS Global Regulatory Board.

With a resurgence of political will in India has come the formulation of several policy initiatives catering to the Indian real estate sector, says RAMESH NAIR. As the government gradually rolls out various initiatives to shore up the real estate sector, we hope that the industry will benefit, and the residential markets will show a revival similar to what the commercial markets are already displaying. Some of the noteworthy initiatives which are prompting this change are: ´Housing for All´ by 2022 Affordable housing has always been a key concern for India, with the country facing a shortage of 18.78 million urban homes. The ´Housing for All´ initiative launched within five months of the Modi Government assuming office was undertaken with the objective of bridging the existing housing gap by 2022. Infrastructure status has been accorded to the affordable housing segment in the Union Budget for FY2014-2015. This will help lower costs for the suppliers of residential real estate. Moreover, increase in the limit of individual loans for affordable housing from Rs 25 lakh to Rs 65 lakh (in metropolitan cities) and Rs 50 lakh (in other cities) has been approved. This move will give a strong boost to the demand side. The challenge for affordable housing, which remains to be addressed, is better infrastructure connectivity to make affordable areas truly habitable. Make in India The objective of this government initiative is to provide employment to the growing number of semi-skilled youths from rural India. It is expected to strengthen India´s manufacturing sector, which currently accounts for less than 30 per cent of the economy. For the real estate markets, we could see an increase in the space taken up by manufacturing companies. Until now, the IT and ITeS sector has dominated space off-take in the commercial markets, and it would do the industry a lot of good to get a wider demand base. The real estate markets of cities like Pune have earlier shown a strong resilience to economic downturns due to multiple demand drivers (IT and ITeS, manufacturing, as well as a strong student community demanding residential spaces). Goods and Services Tax With GST, there will now be a common tax structure, and this will simplify the process of taxation. It will also have a favourable impact on economic activity, as with increased tax transparency, India should perform better on the ´ease of doing business´ matrix. Market sources suggest a well-designed GST tax regime could help lift the economy by around 2 per cent YoY. For the real estate sector, it indicates the growth of key logistics hubs across the country. Warehousing as a market segment, is also expected to see a boom. The Union Cabinet has now approved the setting up of the GST Council, which will finalise the design of GST. All in all, it will be a huge positive for the industrial as well as commercial real estate sectors. Smart Cities mission The government initiative to identify 100 Smart Cities has been undertaken with a view to provide employment to a large number of residents. Cities can be developed based on their core competence in specific economic areas and promote those aggressively. It also aims at developing technologically ´smart´ urban centres with adequate institutional, physical, social and economic infrastructure to attract professionals and investors. The core infrastructure elements in a smart city would include adequate water supply, assured electricity supply, sanitation (including solid waste management), efficient urban mobility and public transport, affordable housing (especially for the poor), robust IT connectivity and digitalisation amenities. The Smart City project will see the mushrooming of efficient commercial and residential real estate in these cities. Special Investigating Team for black money Launched within one month of the BJP assuming office, the objective of this scheme is to bring black money into the ambit of tax authorities. The success of this scheme is expected to impact real estate, as a lot of black money finds its way into these markets in India. The conversion of black money to white will not only curb corruption, but also help to reduce property stockpiles, thereby reducing prices. Commencement of REITs The BJP government announced the commencement of REITs in India in its first Budget in July 2014. Debates over issues such as tax treatment for Indian REITs are still on. The authorities are now looking at the concerns, and trying to resolve them, to make the business of REITs viable for developers, investors and other stakeholders. In Budget 2016, the government removed dividend distribution tax (DDT) on REITs. This is expected to offer commercial developers a liquidity option and retail investors an opportunity to participate in the office realty market´s growth. Model Shops and Establishments Regulation Act The Central Government has cleared the Model Shops and Establishments (Regulation of Employment and Conditions of Services) Act 2015, that promises to revolutionise India´s retail industry and improve ease of doing business in the country. It will allow all public amusement establishments with at least 10 employees - such as restaurants, local markets, shopping malls and movie theatres - to operate 24 x 7. This Act will have to be implemented by all states. Once implemented, offline retailers operating in local markets or malls will stand to benefit hugely, as the Act brings them on a level-playing field with online retailers (who operate round the clock). FDI initiative With the real estate industry facing a slowdown during the last two to three years in terms of foreign capital, the ruling government had in November 2015, relaxed FDI norms by removing two major conditions related to the minimum built-up area as well as capital requirement. According to JLL data, PE funds invested close to $3.1 billion in real estate projects and/or companies across 75 deals in 2015. In the first-half of 2016, the amount stood at $2 billion across 49 deals. It is expected that the positive investment momentum shown by these funds will continue well into the second-half of 2016. About the author: Ramesh Nair is COO & International Director, JLL India, and is also the Managing Director for JLL´s Western India region. He is also a Non-Executive Director on the RICS Global Regulatory Board.

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