5 Govt Measures That Could Revive Realty In 2020

India’s real estate sector is yet to witness the revival that it has been expecting for a long time now. Home sales continue to decline even as new project launches register a fall. Various government measures announced in the recent past, may have been able to make a difference but a lot more remains to be done, even now.

Listed below are some measures that the government can implement, to aid recovery and speed up the country’s second-highest employment-generating sector, in 2020.

1. Speedy implementation of the real estate stress fund

The questions around the sufficiency of the government’s recently announced Rs 25,000-crore alternative investment fund (AIF) notwithstanding, the merits of the fund would be lost, if any more time is wasted in identifying the parties that can benefit from the AIF. Historical data would prove how several well-intended government measures haven’t made the desired impact, because of the failure to perform a desired task within a specific timeline.

2. Faster resolution from insolvency courts

One sees a lot of back-and-forth movement when a builder is taken to the insolvency tribunal, because of his failure to meet the monetary obligations. Though insolvency tribunals were expected to speed up the resolution process, they fail to do so as these cases get stuck in complex legal battles - evident from the cases of Amrapali and Unitech. A more efficient and pro-active government mediation, would go a long way in faster resolution.

Sample this: The Supreme Court recently came down heavily on the government-run MSTC, over its failure to auction the Amrapali Group’s properties and said it might look for another entity to perform the task. If the job had got done in the first instance, thousands of anxious buyers would be closer to getting a home.

3. Stronger RERA

It has been over three years, since the launch of the Real Estate (Regulation and Development) Act (RERA) - a sector-specific law to safeguard the interests of homebuyers. However, a lot remains desired when it comes to the RERA performing its obligatory functions. To begin with, some states are yet to have an infrastructure in place, which would provide the authority the scope to function. In states where that feat has been achieved, overlapping jurisdiction among authorities often hinder the state RERAs from performing their duties. In states such as Haryana and Maharashtra which have a strong RERA, buyer sentiments are improving. If other states are able to do the same, realty could well be on its way to normalcy in 2020.

4. Better clarity on the GST

This is another issue about which great confusion prevails among the taxpayers. Even as builders do the math to arrive at what would actually be better for their financial health ─ switching to the new rates that gives them the option to pay 1% tax on under-construction homes without input tax credit (ITC) or keep paying 8% tax with ITC benefits ─ buyers are clueless on how much they are obliged to pay on purchase of such homes. Whenever there is better clarity, buyers would certainly leave the fence and come back to the market.

5. Clearing unsold inventory

The demand slowdown is proving to be a conundrum that experts are not able to solve — over eight lakh housing units lie unsold with builders, in India’s nine major property markets, show PropTiger.com data. While buyers stay away from the market, leaving builders in great distress, the NBFC crisis is making matters worse. On top of that, builders are obliged to pay taxes on inventory if it is over two years old. While the government is launching one move after another to revive growth in the sector, finding a solution to this complex issue would be crucial.