In 73 years of Independence, we have seen many changes through various real Estate Regulation and Development Acts worthwhile to remember that have had a lasting impact on India’s real estate industry. Since zamindari system in 1947, the Indian Realty sector has come a long way. In fact the changes have been very impactful in last few years basically to protect home buyers and streamlining activities of builders. While old outdated laws and practices have been made redundant. Amendments in existing laws and implementation of new ones like the Real Estate (Regulation and Development) Act (RERA) and the Insolvency and Bankruptcy Code have led the way.
The Real Estate Regulation and Development Act (RERA)
RERA came into existence in May 2017 and as per the Act all builders and property agents need to register with the regulatory authority. ERA has been implemented in every State in India with adjudicating bench and appellate tribunal, to register and hear complaints from home buyers. The process is being made simple and accessible through online portals. Every project needs to be registered separately and a unique registration number is allotted by the RERA State Authority.
Real Estate Investment Trust (REIT)
Real Estate Investment trust came into existence in March 2019.It is expected that this move will help the cash-strapped realty sector. This is a public listed trust where small investors can invest their money safely. At present RIETs are allowed only for commercial real estate. It is expected that demand for office spaces, from IT /ITEs, banking and financial services institutions, logistics, manufacturing and consumer goods will get impetus.
GST regime replacing VAT and Service Tax system
Value added Tax and Services tax was replaced by the Goods and Services Tax (GST) under construction property. Initially, a GST of 18% was levied on real estate with input tax credit, which was subsequently brought down to 5% for regular housing projects and 1% for affordable housing projects, in March 2019.Introduction of GST is a bold step towards reducing developer’s construction cost along with reduction in cost of logistics. GST has also made the process of calculation much simpler by combining all taxes under one head of GST.
Insolvency and Bankruptcy code, 2016
Insolvency cases required a long process time and did not give economically viable solution. IBC (Insolvency and Bankruptcy code) was implemented in May 2016. This code is to bring one stop solution for resolving insolvencies to protect investors, home buyers. It has now been mandated that any insolvency case need to be completed within 270 days from the date of filing. Insolvency and bankruptcy I one of the major worries as overall Rs.10.36 trillion were declared as bad loans by commercial banks as of March 2018.It is expected that with the introduction of the code banks an the investors will get some respite.
Affordable Housing Schemes
Affordable housing is the most required solution to provide housing for economically weaker section of society. Pradhan Mantri Awas Yojana (PMAY) was launched in June 2015 to provide over 2 crore houses in urban rural areas. Under this scheme the housing project under PMAY was classified into economically weaker section, lower income groups and middle income group families depending upon their annual income. 3 Phases of PMAY envisage starting and completing the house construction work as follows:
· PMAY Phase-1 from April 2015 to March 2017 to cover 100 cities.
· PMAY Phase-2 from April 2017 to March 2019 to cover additional 200 cities.
· PMAY Phase-3 from April 2019 to March 2022 to cover the remaining cities.
As of 25 April 2016, the government has identified 2,508 cities and towns in 26 states for beginning construction of houses for urban poor. Construction of 1,86,777 additional houses for the benefit of urban poor with an investment of Rs.11,169 cr with central assistance of Rs. 2,797 cr was approved in February 2018, taking the cumulative total houses approved to 39,25,240 houses including subsumed RAY ( Rajiv Awas Yojana ) scheme, of the targeted 10 million houses by March 2022
Draft Model Tenancy Act
Tenants form a major proportion of occupants in the urban housing sector. It is very important to safeguard the interest of tenants and also land lords. The large number of disputes had been mounting and reached litigation stages between tenants and land lords. In view to streamline and make the tenancy Act more acceptable and hassle free, first time rental housing was put on the agenda, by finance minister Nirmala Sitaraman, in Budget 2019. The Model Tenancy Act is expected to make investment proposals in housing sector more tenable.
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