The reforms began in May 2016, when the Real Estate (Regulation and Development) Act 2016 (RERA) came into force. The Act came into full effect from May 2017, bringing unprecedented levels of transparency into real estate projects. RERA promises to minimize delays in projects, weed out unscrupulous developers, and provide homebuyers with detailed information on the specifications and the progress of the projects they invest in.

RERA was followed by the introduction of the goods and services tax (GST), which rolled many different taxes into one. Until then, both consumers and developers had to pay multiple, and often varying taxes, which caused confusion. GST has come as a relief for both, by bringing clarity into the process. Moreover, it will lower the cost of construction, and bring more liquidity into the market.

The overall sector and end users have great hopes from the Goods and Services Tax (GST). The sweetness of the fruit, however, will be clear only after the Centre and states are on the same page over what goes in whose kitty. The move towards GST has triggered a positive sentiment as it proposes to replace a web of taxes with one tax. Irrespective of its benefits to developers’ balance sheets and buyers’ bank balances, it will at least make property purchases simpler.

The sector will also benefit from the amendments that were made late in 2016 to the Benami Transactions Prohibition Act. This, coupled with the central government’s stated intent to make Aadhaar linkage compulsory for all property transactions, will help in curbing malpractices and stopping the inflow of black money into real estate.

Policy Regime

In a further relaxation in FDI policy, the Cabinet approved 100 per cent FDI under automatic route in the construction development segment, which includes townships, housing, built-up infrastructure, and real estate broking services. It also clarified that real estate broking services do not amount to real estate business and is, therefore, eligible for 100 per cent FDI under automatic route. “The timing for this announcement is significant as the retail sector is poised to receive significant real estate supply in the near future.