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Demonetisation has Beneficiary Long Term Impact on Real Estate with Initiatives of RERA and GST

The transparency brought in by demonetisation, aided by RERA, GST reforms and liberalisation of FDI norms, has boosted the performance by fair Real Estate companies.

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Long Term impact on Real estate
Long Term impact on Real estate has been depicted by Demonetisation.Wikimedia.
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New Delhi, October 4: Though the government’s radical measure of demonetisation has disrupted the economy and has hit the real estate sector — already reeling under prolonged slowdown — it will turn out to be a blessing in disguise in the medium-to-long term.

As an asset class, real estate has been a big source of generating and consuming black money. The cash component in real estate has been there at various levels, beginning with land transactions where it amounts to 30-50 per cent. The cash payout is quite high in luxury housing too. The consumption of cash has been as high as 30 per cent in secondary market transactions.

The primary market transactions, however, are by far bereft of cash component as home purchases are financed through loans from banks and housing finance corporations. It is another matter that even in primary market deals, developers have been encouraging cash payouts by luring property buyers with good discounts on property price.

The speculative buying by investors through offerings like underwriting and pre-launches has also been involving cash payout, leading to artificial price hike and in turn making homes out of the reach of masses.

Demonetisation, coupled with the government’s move to check benami transactions through legislation and curbs on cash transactions, was meant to clean up the system.

This sudden ‘shake up’ was, however, not without its adverse impacts. Demonetisation badly affected the liquidity in the capital-intensive real estate sector, deepening the problem of massive fund shortage/cash crunch faced by developers reeling under delayed deliveries, which deterred buyers from purchasing property.

long term impact on Real Estate
There are long term impact on Real Estate due to Demonetisation. Pixabay.

The impact was more evident in markets like NCR and Mumbai which were largely investor-driven, compared to southern markets of Bengaluru and Chennai and even Pune in the west, which have been end-user driven. The premium/luxury residential segment, in which the cash component was more in transactions, got impacted by demonetisation.

Real estate experts’ belief that the impact of demonetisation is only short-term and will not have long-term impact, stems from the fact that developers who have been following transparent and fair practices have not been affected by demonetisation and instead it worked out to their advantage.

This also turned out to be a positive development for big global real estate consultants like JLL India which doubled its profits in 2016 over 2014-15, with 60 per cent revenue growth.

One key positive impact of demonetisation and RERA (Real Estate Regulation Act) has been that speculative investors deserted real estate and end-users/genuine buyers, who were all these years pushed to the sidelines, came out in large numbers. Now, it is the property consumers who are driving the real estate market, especially residential market, aided by the government’s pro-industry and pro-consumer initiatives.

The step to promote affordable housing and according real estate industry status for the purpose of making easy and cheap funds available to the sector also helps.

Demonetisation has particularly boosted foreign funding. The transparency brought in by demonetisation, aided by RERA, GST reforms and liberalisation of FDI norms, has boosted the confidence of foreign investors, which is clearly evident from the spurt in foreign investments, particularly from pension funds.

This will inject much needed liquidity in the sector starved of funds. Targeting consumers, the government under the Pradhan Mantri Awas Yojana (PMAY), is providing substantial interest subsidy to home buyers. The clampdown on floating cash in the system has contributed significantly to curbing inflation which, in turn, helped RBI in cutting interest rates, thereby boosting home buying.

The proposed measures to liberalise FSI norms and rationalise stamp duty, will give further fillip to the residential sector, particularly affordable housing.

Demonetisation had a salutary impact on property prices by curbing cash transactions and checking speculative pricing, in turn increasing affordability, which is a key to achieve the government’s flagship mission of ‘Housing for All’. RERA & GST are further aiding demonetisation to control prices.

long term impact on Real Estate
Demonetisation aided with RERA and GST will put long term impact on Real Estate. Pixabay.

The key provisions in RERA, to speed up project completion, by checking diversion of funds through mandatory escrow account, stringent penalties to check project delays, together with the government’s move to make all building sanctions online, will go a long way in checking time and cost overruns of real estate projects, thereby controlling home prices.

The ban on pre-launching of projects under RERA will also check artificial spurt in pricing. GST has come to tackle the flow of cash in the purchase of building materials by introducing input credit tax. Further, the government’s plans to liberalise FSI norms, especially for affordable homes, and rationalising stamp duty will have a sobering effect on property prices.

But for some little lingering effect, economists and real estate experts believe that the overall downside impact of demonetisation has faded and its impact is not going to be there in the next quarter.

Says Ashwinder Singh, formerly CEO of JLL India & now CEO of leading real estate consultancy, Anarock Consultants: “Other than in terms of the initial confusion-induced decline in sentiment, the trend that is emerging now, points towards a recovery in buying sentiment with serious buyers already returning to primary markets.”

The entire demonetisation exercise undertaken by the government and aided by other reforms, like Benami Property Act, RERA and GST, is to be looked at in the backdrop of the government’s multi-pronged policy to create institutional and regulatory framework for speedy and steady growth of the economy. And at the centre of all these initiatives is real estate, which is a key contributor to GDP. Going forward, these policy initiatives will help make real estate more organised, transparent, credible and affordable, making the sector investor and consumer friendly. (IANS)

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Empowering The Nation Through ‘Digital India Project’

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The digital india project includes several projects which will focus on better governance, knowledge. Wikimedia Commons
The digital india project includes several projects which will focus on better governance, knowledge. Wikimedia Commons
  • Digital India Project will boost the development process and will help the citizens to engage themselves in a hassle-free way
  • Prime Minister Narendra Modi launched the Digital Media program to push the use of technology
  • The Ministry of Tourism has taken up the initiative of implementatingTourist Visa on Arrival enabled with Electronic Travel Authorisation (ETA)

Digital India initiative has been launched by the government of India to increase digital connectivity and make governance more transparent. The initiative includes several projects which will focus on better governance, knowledge and universal phone connectivity across the country. Under the digital program, the government plans to introduce Public Internet Access Program, Broadband Highways, Universal Access to Mobile Connectivity and much more. These all platforms will boost the development process and will help the citizens to engage themselves in a hassle-free way.

Also Read: Section 377: Does It Really Has Anything To Do With Indian Culture?

Prime Minister Narendra Modi launched the Digital Media program to push the use of technology to connect and empower people in areas relating to health, education, labour and employment, commerce, etc. The governance is shifting from e-governance to m-governance where “M” stands for mobile governance. The initiative is to bring big investments in the technology sector and this will further help in creating a participative, transparent and responsive government.

The governance is shifting from e-governance to m-governance where “M” stands for mobile governance. Wikimedia Commons
The governance is shifting from e-governance to m-governance where “M” stands for mobile governance. Wikimedia Commons

Here are some key initiatives which form a part of Digital India week:

  1. SWATCH BHAARAT app

The Swachhta Abhiyan is an initiative by the government for informing the citizens of sanitation and hygiene. The program has turned into a national campaign with citizens becoming active participants in cleanliness drive across the nation.

The dream of Mahatma Gandhi of a ‘Clean India’ is being realized with millions of people across the country joining the cleanliness initiatives of the government departments to make India clean as a part of this ‘Jan Andolan’.

The Swachhta Abhiyan is an initiative by the government for informing the citizens of sanitation and hygiene. Wikimedia Commons
The Swachhta Abhiyan is an initiative by the government for informing the citizens of sanitation and hygiene. Wikimedia Commons

Website: https://swachhbharat.mygov.in/

  1. PRADHAN MANTRI JAN-DHAN YOJANA (PMJDY)

Pradhan Mantri Jan-Dhan Yojana is a financial inclusion plan comprising an integrated approach to bind all the financial transactions of all the citizens. The plan contemplates universal access to banking facilities at least one basic banking account in every household, financial literacy, access to credit, insurance and pension facility.

The scheme proposes of channelling all Government benefits (from Centre / State / Local Body) to the beneficiaries’ accounts and pushing the Direct Benefits Transfer (DBT) scheme of the Union Government.

Website: http://pmjdy.gov.in/

3. GOODS AND SERVICE TAX NETWORK (GSTN)

The GST System Project is a remarkable and complex IT initiative. It is for the first time that a uniform interface is established for the taxpayer and a common and shared IT infrastructure between the Centre and States.

Also Read: 10 Famous Indian Scientists Who Made The Difference

The platform is a trusted National Information Utility (NIU) that will help in achieving a reliable and efficient IT backbone for the smooth functioning of the Goods & Services Tax system. It enables economic agents to leverage the entire nation as one market with minimal indirect tax compliance cost.

Website: h ttp://www.gstn.org/index.php

4. FARMER PORTAL

The Farmer Portal provides all the relevant information and services to the farming community and private sector through information and communication technologies. It will help in supplementing the existing delivery channels provided for by the department.

The Farmer Portal provides all the relevant information and services to the farming community and private sector. Wikimedia Commons
The Farmer Portal provides all the relevant information and services to the farming community and private sector. Wikimedia Commons

Farmers’ Portal is an initiative to create a one-stop window for meeting all informational needs relating to Agriculture, Animal Husbandry and Fisheries sectors production, sale/storage of an Indian farmer.

With this, Indian Farmer will not be required to scuffle through different websites for any information.

Website: http://farmer.gov.in/

5. eVISA

The Ministry of Tourism has taken up the initiative of implementatingTourist Visa on Arrival enabled with Electronic Travel Authorisation (ETA). It strongly backed by Ministry of Home Affairs,  Ministry of External Affairs and Ministry of Civil Aviation for implementing this programme.

Also Read: Kalpana Chawala: The Woman Who Made The Difference

The e-Tourist Visa enables the foreign visitor to apply for an Indian Visa from his/her home country without visiting the Indian embassy and can also pay the visa fee online.

Website: https://indianvisaonline.gov.in/visa/tvoa.html

6. DIGITIZE INDIA

Digitize India is an initiative under the Digital India Program of the Government of India. Digitize India Platform will provide digitization of services of all the scanned document or physical documents for any official work.

The focus is to digitalize all the existing data which are in different formats into data extracts for document management

Website: https://digitizeindia.gov.in/

7. DIGITAL AIIMS

Through Digital AIIMS program, every Patient visiting AIIMS will be given a Digital Identity by the Unique Health Identification Number and it will be generated on an Aadhar platform.

Through Digital AIIMS program, every Patient visiting AIIMS will be given a Digital Identity. Wikimedia Commons
Through Digital AIIMS program, every Patient visiting AIIMS will be given a Digital Identity. Wikimedia Commons

The project was initiated in January 2015 with the creation of an effective linkage between AIIMS, Unique Identification Authority of India (UIDAI) and the Ministry of Electronics and Information Technology (MeiTY).

Website.http://ehospital.nic.in/ehospital/

8. DIGILOCKER

Targeted at the idea of paperless governance, DigiLocker is the flagship program of the Indian Government. The initiative aimed at transforming India into a digitally empowered society and knowledge economy.

DigiLocker runs parallel with Digital India’s vision, where every citizen of the country will be provided with a private space on a public cloud and making all documents/certificates available in this space.

Through this platform, issuance and verification of documents will be done in a manner, thus eliminating the requirement of any physical documents.

Website.https://digilocker.gov.in/