Real estate is one of the most prominent sectors globally. This sector is attracting investments from residents as well as NRIs. The reversal of recession in real estate could be witnessed with the housing sector gaining acceleration from the past few years. Housing has always been one of the major agenda for the Government as it is a vital sector of the national economy influencing the quality of life.
Why real estate sector is important for the economy?
Besides providing shelter to the people, it is a high labor-intensive sector with huge employment generation and generating taxes. It is one of the major sectors contributing to the nation’s GDP growth up to 7 percent and expected to contribute double the existing rate by 2025. And hence, the government of India has time and again taken special measures to boost the sector and facilitate the investors as well as the home buyers. The latest announcement by Finance Minister Nirmala Sitharaman, to infuse INR 10000 crore funding in the infrastructure will help in the completion of affordable and middle-income housing projects.
Government has recently announced some measures to boost the real estate sector as a festive gift:
- Foreign Direct Investment– The Government of India has allowed 100 percent Foreign direct Investment for townships and various projects. That has resulted in a rise in the flow of FDI into the sector and encouraged increased transparency.
- The decrease in Interest rates of home loans – With the objective to facilitate the buyers especially the first time buyers, the Government has taken several initiatives and extensions of benefits under section 80 I to mass housing projects, increase in rebates for housing loans, lower interest rates etc. To empower government servants to buy new houses, the interest rates will be lowered on house building advance and planned to be linked with 10-year G-sec yield. The government has also introduced the merger plan of PSBs which would improve the lending capacity of banks. A decrease in interest rates will not only help the buyers but also accelerate the pace of the real estate sector in the festival season.
- Pradhan Mantri Awas Yojna– More than 8 million houses have been sanctioned by mid of 2019, under the urban Pradhan Mantri Awas Yojana (PMAY). This is complementing to the previous government initiative announced in 2015 “Housing for all by 2022” promoting the concept of affordable housing.
- Reduction in GST– With the focus on it’s agenda of affordable homes, the government has decided to cut the Goods and Services Tax (GST) rates to a mere 1 percent for this segment. Also, the GST rates for under-construction projects have been reduced from 12 percent to 4 percent. The lower tax burden will lead to increased demand in the affordable housing segment.
Whether these initiatives will be able to revive the sector and give it a positive boost will depend on the upcoming financial year FY 19-20. Improvement in sales of the projects adhering the government norms and policies has already been witnessed in FY-18-19. More of such initiatives by the Government will lead to the growth of the sector and faster possession of the projects in making.