Government’s current efforts to
bring transparency in the sector have been implemented for improving the ease
of doing business in this sector, as well as to boost investors’ confidence.
Once implemented in the right spirit, these measures are likely to fascinate
more institutional investments and FDI into the Indian commercial realty
market.
Let’s look on to some of the reforms and
see how they have benefited the Indian Commercial Real Estate Market:
Real Estate (Regulation and Development) Act or RERA: This act was
passed in March 2016, covers both residential and commercial realty segments. RERA
has the potential to bring in greater transparency, improve the bargaining
power of the consumer (vis-à-vis the companies) and be a key enabler of genuine
demand over the longer term. This indeed is a huge step towards solidifying the commercial
real estate business in India.
According to industry experts, the
Real Estate Regulation Act has boosted the sentiments in the commercial segment
as the sector is expected to become much more transparent and organised which
in turn will benefit all stakeholders.
Goods and Services Tax (GST): The amendment of this landmark Good
and Services Tax (GST) has been India’s biggest structural reform in decades. It
is expected that under the GST regime, there would be a smooth flow of credit
and current restriction on construction related credits not being available for
offset is likely to be removed. This
would help to reduce the project costs in the hands of the developer, and have
a positive effect on rentals.
According to the industry
experts, this landmark bill would reduce harassment which is there due to
multiple taxes today.
Moreover, the GST regime is
expected to impart greater transparency through market mechanism, it is
imperative that real estate transactions forms an integral part of the proposed
GST design.
Real Estate Investment Trusts (REITs): The introduction of REITs is
yet another game changing policy initiative by the Government.
According to industry experts, with
huge potential in Indian commercial market REITs will facilitate investments
into the country. Currently, around 229 million sq. ft of office space is
REIT-compliant. Even if 50% of this space were to get listed in the next few
years, experts are looking at a total REIT listing worth $18.5 billion. As
India is witnessing a growth in its commercial assets, there will be more opportunities
for REITs in upcoming years.
With a compelling need for
additional funding mechanisms, the effort to allow REITs is yet another step
towards the organised development of the sector.
The passage of GST and RERA have
been one of the biggest highlights of the year that is sure to benefit the commercial
sector in the long run. The commercial real estate sector has been continuously
endeavouring to improve their stretched capital structure and with Govt
initiatives industry has high hopes to retain its position as a bright spot in
the global economy, with better growth prospects expected to support office
space leasing in 2017.
Additionally, the policy
announcements and reforms to recuperate the commercial real estate space,
including the relaxation of Foreign Direct Investment (FDI) norms, introduction
of 100 smart cities, direct and indirect tax benefits for affordable housing
projects, the implementation of RERA, GST and Real Estate Investment Trusts
(REITs) have helped in generating a positive outlook in the commercial segment.
These reforms and policies are further expected to work towards enabling ease
of doing business in the country, while supporting corporate entities entering
or expanding their footprint across leading cities in India.
