CHANGES IN REAL ESTATE SECTOR IN INDIA

ABSTRACT:

The objective of the financial sector is to increase the efficiency and effectiveness of the financial system. To mobilize saving effectively and channel such savings efficiently to the most developing sector. The objective of real estate sector reform was to bring confidence and transparency in the sector. The RERA Act 2016, which came into force on May 1, 2016, has given the Indian real estate Indian industry-first regulator. It aimed to bring fair and equitable transactions between retailer and seller, making transactions accountable and transparent.

In the meantime, the Benami property amendment act 2016 came into force which helped to reduce corruption in the Indian market. To reduce corruption, monetization played an important role. Monetization's impact came on the real estate market as it nullified 86% of the country’s banknotes. Generally, homebuyers pay 30 -40% value in cash to avoid tax.

As a last piece of change came the Goods and Services Tax Act, 2017 which disturbed real estate transactions further. By the end of 2018, it was clear that the real estate market is now not on the boom as delayed in projects and unsold units and even in the upcoming future. Beyond, the data there are many stories where investors' money is stuck in delayed projects.

INTRODUCTION:

Traditionally real sector is dominated by a large number of unorganized players. For a long time, buyers felt that transactions are largely in favor of developers and they are facing problems. The RERA Act (Real Estate Regulation and Development) Act, 2016 intends to bring transparency and also to protect the interest of buyers in the real estate sector. The RERA Act was passed by both Rajya Sabha and Lok Sabha, on March 10, 2016, and March 15, 2016, respectively. In six months the central and state governments were required to notify their own rule under the Act.

Various compliance which had to be followed like:

• The act will provide a unified regulatory environment and will standardize practice across the real estate sector.
• Projects should be registered subjects to condition with state RERA. Information is provided to the concerned allotted person for minor addition and deletion also for transferring majority rights of property to the third person.
• The compulsion for timely completion and submission in the favor of the consumers.
• A separate account to be maintained to park funds of project receivable.
• The standard sales agreement is prescribed by the Act to prevent any punitive clause against homebuyers by the promoters.
• In case of non-compliance imprisonment and provision up to 10% penalty on a project, the cost has been prescribed under the Act.

FACTS OF THE CASE

The broker segment needs to register under the act which is around USD four billion industry with an estimation of 5,00,00 to 9,00,000 brokers. The industry was unregistered and irregular. Agents must perform a more accountable role as they can’t promise anything which is not in the document. Agents who are professional and followed the norms of business get benefits and those who are inexperienced, unprofessional, and do not follow the norms will have to face hefty penalty or imprisonment, or both.

STEPPING AHEAD

In the meantime, the Benami property amendment act 2016 came into force in November 2016, created curiosity in people about the possible outcome of real estate. Real estate is the sector where people invest their unaccounted money. This act provides to curb black money to ensure all real estate transactions s conducted in the owner’s name where consideration is paid from known sources. It will increase the revenue of the government and will increase transparency. It will also impact corruption and unfair trade practices in the real estate sector. The Act prohibits benami transactions which are punishable by one-year imprisonment and can be increased to seven years. Along with the fine, up to 25% of the fair market value of the property shall be payable.

According to our study, it's concluded that the rules and implementation of the RERA Act, people suffering in following. Suddenly currency notes of Rs 500 and Rs 1000 were banned by the Indian Government. It gives a huge impact on the Real Estate market as it nullified 86% of the country’s banknotes.

Noted as:

• It brought a downfall in property prices as home buyers generally pay 30-40% value in cash to avoid tax.
• There was a lot of uncertainty and a significant slowdown in the real estate market due to the cash crunch.
• According to the study in the last quarter of 2016, India’s eight major cities registered a fall of 44% in the year to the sales which are the lowest level since 2000. Also noticed, new launches were down by 61% in the year to the year 2016.
• Demonetization shook up the working style and targeted the masses has little impact on good developers.
• The small players had to realize they have to change their working model for surviving in the market.

As reported by one of the brokers from Mumbai those who were looking for property for investment vanished from the market because of the cash crunch. Further noticed in the last two decades he has not seen such low demand in this industry.

The country’s largest lender state bank of India started searing lending rates by 90 basis points to 7.75% for overnight maturities and 8.15% for three tenures. The home loan interest rate was at a six-year low to 8.6% from 9.1%.  this was after demonetization. There was a slight recovery as buyers shifted towards ready to move in projects.

The last piece of change that came was the Goods and Services Tax Act, 2017 which disturbed the real estate transactions further. Once GST came into force it will replace at least seventeen states and federal taxes and as the consequence, the buyer must pay one tax at a uniform rate. If the government will follow GST then the state should be compensated for the lost revenue.

STRATEGIES FOR SURVIVAL

The economist analyzed that in the long-term impact of demonetization will be beneficial for the economy. As it will increase the transparency and confidence of investors. As per a report by 2020, growth in the real estate sector is estimated to increase to 1.35 square feet.

To survive in the business:

• Focus on becoming a local market leader for sustainable growth. It may include joint venture and profit-sharing with the landowner and local knowledge.
• A developer will be under more scrutiny, he should make the process more efficient at all stages of execution either its pre-construction or post-construction or during the construction.
• Due to shrinking margins focus should be on cash management of projects and return on investment.
• The developer should segment customers and build brands to position themselves for various customer types.
• Innovative selling approaches should be taken.

In the year 2018 real estate sector unsold units and delayed projects are indicated that the same slowness in the real estate market will linger longer. It was believed that all the measures will bring corporate governance, transparency, and confidence in the real estate sector.

CONCLUSION

After this case, it can be concluded that many changes have been taken in the real estate sector like RERA Act, the Benami property amendment act, demonetization, and GST. These reforms change the way of doing business in the sector.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.