Riding a positive sentiment generated by the hope of political stability brought in by Narendra Modi-led majority NDA government, the real estate sector that has been facing a slowdown for the last couple of years, looks up to ‘good days’ ahead. ‘Acche din aa rahe hain!’ says Vinod Behl. Read on …

Real estate is very much a sentiment- driven business, and of late the sector has been reeling under sentiment hitting rock-bottom. But the hope of a stable government ahead of Modi’s massive win has already turned the sentiment positive. New housing units witnessed 43 percent increase in Q1, 2014. In March, 2014, just before elections, foreign investment inflows more than doubled to UD$ 3.53b, up from US$ 1.52b during the same month last year. And this business optimism is clearly reflected in the recent ‘Grant Thorton’ report, which is already having its desired impact. ICICI Bank has set the ball rolling by reducing home loan rates. And a leading Bangalore developer has come up with a unique offer to reduce the buyers’ home loan interest burden by 3.25-3.50 percent, with a view to cut down the overall cost of home ownership. This positive sentiment has further got strengthened with Modi’s win. In fact months before the elections, peeved at the UPA government’s policy paralysis, CREDAI, the apex body of real estate developers, had put its weight behind BJP and Modi. Today, one of the first and foremost jobs before the Modi government, is to boost and improve the investment climate. Already SEBI has got activated to ensure early take off of REITs which offer an alternate, transparent and safe investment vehicle for retail investors, giving much hope to the cash-starved real estate sector. Moreover, RBI is hinting at easing norms for infrastructure funding. Also, DIPP is favouring the tweaking of FDI norms to facilitate foreign investment in farm land. To further give a boost to FDI , the Modi government is expected to liberalise norms allowing insurance and pension funds to invest in real estate, besides reducing the capital investment limit and lock-in period. The government’s priority is also to address the issue of industry status and the setting up of a regulatory body for real estate, to pave the way for easy access to cheap funding and boosting investment through transparent and safe property transactions.

Today, with projects worth INR 6.26 trillion shelved, abandoned, or stalled in 2013-14 as per CMIE, project implementation and fast tracking big bang infra projects will be a key strategy of the PMO under Prime Minister Narendra Modi to revive growth. And it is expected that his government will implement FICCI’s expert committee report on a single-window clearance system that has been gathering dust. And since land acquisition is a major hurdle for projects take off, the Modi government has to fix the new Land Acquisition Act – LARR 2013, which has made land acquisition more difficult, time consuming, and expensive. Given that the DIPP-Accenture study has named Gujarat as best state for its simplified land acquisition process, and the DMICDC has successfully tried the land pooling model in Gujarat, rejigging LARR on similar lines could fast-track the implementation of projects. Further, the Gujarat model of using remote-sensing technology and egovernance tools can come handy for project monitoring.

As the BJP manifesto promised integrated habitat development and the creation of 100 new cities, the new government may replicate the Gujarat model of urban development, ensuring planned development of semi-urban areas as vibrant cities. And to realise its goal of housing for all by 2022, the Modi-led NDA government has to promote affordable housing in a big way, by incentivising developers with lowcost funds, liberal FAR, density norms and tax benefits, besides offering home-buyers loans at concessional rates. With the Modi government set to present a full-fledged budget shortly, one expects it to take some short-term and long-term policy initiatives with bold reforms to put real estate and infrastructure on fast track.

But real estate being a state subject, the real challenge before the government is to take states along on the reform front, especially as different states have differentset of rules for development planning, project approvals, FSI norms, and regulatory framework. However, with the end in sight to the long spell of policy paralysis, and with right policy prescription, this new government should be able to put the real estate and infrastructure sectors right back on the growth path in coming months.

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