June 26, 2019 by transcontriumph
Presently, the Indian real estate sector is at a stage where it needs a more simplified and faster process of getting project approvals as only then will the builders be able to focus on timely deliveries.
Certainly, the implementation of Real Estate (Regulation and Development) Act, 2016 (RERA) has imbued the much-needed transparency into the real estate sector, but the government has failed to understand that RERA alone cannot assure timely delivery of projects. Bringing single window clearance in place is essential to fast-track project completions.
As of now, builders have to fetch an average of 25 approvals from various government bodies, which not only increases the project timeline by 18-30 months but also propels the project cost. Despite trying hard, many developers are failing to meet project timelines. Therefore, it is essential that the government focusses on a more simplified online project approval process which minimises project delays.
Reduction in taxes has been another long-pending request of industry stakeholders. The 12 percent Goods and Services Tax (GST) levied on under-construction properties has put a financial strain on the homebuyers, who are already burdened with the registration and stamp duty charges. A reduced GST rate of five percent would not only lower the burden on the buyers, but would also encourage better compliance and improved market sentiment.
We have seen a resurgence in the Mumbai’s residential property market with increased sales happening mainly in the affordable and mid-income housing segment. In order to further promote the affordable housing sector, the government needs to give more incentives such as income tax benefits and subsidies along with subsuming stamp duty under GST. The incentives will accentuate the construction of houses for the Economically Weaker Sections (EWS), Lower Income Group (LIG) and Mid-Income Groups (MIG). Developers will be encouraged to take up more affordable housing projects, which will bring down the gap between demand and supply drastically.
The government should also grant industry status to the real estate sector. An industry status implies a lower cost of fund acquisition for developers, more affordable housing and improved housing demand. Presently, developers are reeling under acute financial pressure owing Escrow account maintenance under RERA. Besides, the multi-level approval process is escalating projects costs unimaginably. In such a scenario, awarding an industry status to the sector would be the biggest support from the government.
Overall, the real estate sector is the second largest employment generator after agriculture, and many ancillary industries depend upon it for their sustenance. Thus, the government should review the long-pending demands of the industry stakeholders and announce the necessary measures to corroborate the sector’s growth and development.
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