by Akhilesh K Prasad,
The Narendra Modi government came to power in May 2014 with much hype and expectations. As the tenure of the government comes to a close, it is imperative to analyse his actions and their on-ground impact on the real estate sector. Hereinafter are enlisted the salient policy changes with respect to the real estate sector made by it, and its resultant impact:
Relaxation of FDI restrictions
Earlier, there were restrictions on FDI investments and exit in the real estate sector. Investments in the sector were limited to equity in residential projects that came through the FDI route. Modi government relaxed these restrictions. As a result, FDI investors can invest in projects less than 50,000 sqm of a built-up area or make exits as and when they deem fit. Thus, investors are now able to target city-centric projects.
Notification of REIT’s by SEBI
This was one of the first reforms related to realty by the Modi government. Prior to this, investments and consequently, liquidity in leased office assets was limited. The exit was difficult as one would need to approach large investors. This notification improved investment activity in the office spaces and malls. It has become easier for large investors to invest big and to liquidate and exit once returns are made.
Make in India
After the announcement of the ‘Make in India’ initiative, a lot of multi-national companies were attracted towards setting up manufacturing units in India. The real estate sector witnessed an increase in the demand for large-scale high-end industrial parks. Prior to this, industrial real estate was largely unorganised.
The introduction of GST gave an impetus to the warehousing and logistics sector. It motivated industrial real estate developers to target warehousing and logistics parks.
Infrastructure status to affordable housing
In the budget for 2017-18, the Modi government granted infrastructure status to affordable housing in pursuance of its pet project, ‘Housing for all by 2022.’ As a result, affordable housing projects are now offered priority approval status and tax holidays. Affordable home buyers are also offered interest rate subsidies for home loans. As of now, the affordable housing sector is the key driver of residential real estate business.
The Real Estate (Regulation and Development) Act has brought about the much-needed transparency to the real estate sector. It started the process of organising the real estate sector which was largely unorganised earlier. Consequently, there has been a marked improvement in investor and buyer confidence.
While the above policy changes have been widely appreciated, the Modi government has come under severe criticism for relaxing environmental laws to boost India’s rank in ‘Ease of doing business.