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NDA’s Bihar debacle proving blessing for realty

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Picture Courtesy:-www.newindianexpress.com

New Delhi: Contrary to the general impression, the defeat in the Bihar assembly elections has not dealt any blow to the reforms agenda of the ruling National Democratic Alliance. Rather, it has proved to be a blessing in disguise for the Prime Minister Narendra Modi’s government to fast-track reforms – legislative and administrative.

For the realty sector, those that stand out include the move for a pan-India goods and services tax regime and legislation for a real estate regulator, both of which are expected to get the parliamentary nod in the current winter session of parliament.

Close on the heels of the Bihar defeat, the government gave a Diwali bonanza by easing foreign investment norms in 15 major sectors, including construction, and raising the approval limit for the Foreign Investment Promotion Board (FIPB) from Rs.3,000 crore to Rs.5,000 crore.

It removed entry and exit barriers in the construction sector, doing away with area restriction of 20,000 sqm and capitalisation of $5 million and allowing foreign investors to exit and repatriate investment before a project is completed but with a lock-in period of three years.

The government’s sense of the real estate industry is that it should not survive on subsidies but on the strength of the market economy. That’s why it’s focusing on realty reforms aimed at strengthening fundamentals for the sustainable revival of the sector.

The delayed reforms had affected the market sentiment and the government has been receiving a lot of flak for its inability to check retail inflation and generate employment.

The government realises it is imperative to provide momentum to reforms if it has to leverage strong domestic growth in the form of healthy seven percent plus GDP growth in the coming fiscal, besides picking up manufacturing activity.

The assessment of global rating agencies like Moody’s weighs heavily on the government’s mind that delay in reforms may hit investment. The Organisation for Economic Co-operation & Development (OECD) has also emphasised that India’s growth prospects remain relatively robust provided further progress is made on implementing structural reforms.

The government is focusing on triggering investment. By exercising tight control over unproductive expenditure, it has greatly increased capital investment by the public sector. And to further push this, the National Investment and Infrastructure Fund has been set up to leverage public investments.

The government also plans to come up with tax-free infra bonds to broaden the corporate bond market and provide long-term finance for infrastructure. It is also looking at providing tax incentives to spur investment in housing.

Then, FDI has considerably increased and private investment is picking up. The government is also working on simplifying FDI & ECB rules to speed up foreign investment.

It plans to put 98 percent sectors for foreign investment under the automatic route. And, to help the fund-starved real estate sector to tide over the current crisis, the government is working on allowing foreign investments in alternate investment funds (AIFs) and in infra and realty trusts via the automatic route.

The most crucial piece of legislation that has a big bearing on real estate is the GST Bill expected to be passed in the current parliament session, especially as the government has now adopted a collaborative and accommodating approach.

The introduction of a single GST rate across the country is aimed at dismantling the inter-state fiscal barriers to create a common market within India to boost competitiveness and make it easier to do business.

It will result in simplification and uniformity of taxes, putting an end to tax inefficiency in the form of different state-specific VAT and service tax laws. Though there are two main taxes for home buyers – VAT and service tax – multiple taxes in the form of CST, custom duty, excise duty and the like paid by developers result in price escalation by about 25-30 percent.

A likely GST rate of about 20 percent (the Congress party is demanding a cap on 18 percent) should be quite beneficial for the sector in lowering the current tax burden, in turn resulting in the reduction of home prices. Separately, the government proposes to provide tax relief to the real estate sector in the budget for 2016-17.

The decks are already cleared for crucial Real Estate Regulation & Development Bill, 2013 in the winter session as the government has accepted changes proposed by a Rajya Sabha panel. This bill will give a major boost to real estate sector, bringing in fair play and transparency in transactions to safeguard the interests of buyers and investors.

The government, which has already streamlined environment clearances for improving ease of doing business, is now fast- tracking single window clearance system for multi-storied buildings that should come through by early December 2015.

The simplified process will considerably cut delays in granting approvals, in turn resulting in cost reduction that will benefit property consumers.This will also provide much – needed relief to debt- ridden developers by way of faster projects completions and lesser interest outgo.

For its flagship programme — “Housing for All”, envisaging building 30 million houses, the government is readying a plan to provide more funds for constructing rural houses and providing subsidised power and water. Under its AMRUT programme, the Centre has allocated Rs 11654 crore for infrastructure upgrade.

The Bankruptcy Code — providing for an easier exit for businesses, safeguarding the interests of lenders and investors — together with proposed new start-up policy, will foster new enterprises and fast-track winding up of failed enterprises, with a view of strengthening ease of doing business.Further, labour reforms are aimed at removing rigidity and encouraging employment.

The government’s new-found aggression and resolve to push reform agenda have already seen the BSE Realty Index, registering the most rise in the last fortnight and further reform measures to be unveiled in the budget, will serve to speed up the revival of real estate facing the slowdown.

(Vinod Behl, IANS)

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As The Election Nears, India’s Opposition Promises Several Economic Steps

Modi said at the Delhi convention that the opposition was working on a "desperate alliance," while the BJP would give a "strong government."

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Rahul Gandhi, Election
Rahul Gandhi, president of India's main opposition Congress Party, speaks at a rally ahead of October's 150th birth anniversary of Mahatma Gandhi, in Dubai, United Arab Emirates, Jan. 11, 2019. VOA

India’s main opposition Congress Party will simplify the goods and services tax (GST) and make “rational economic decisions” to attract foreign investment if voted back to power in a general election due by May, leader Rahul Gandhi said Saturday.

Launched in 2017, the GST was initially hailed as Prime Minister Narendra Modi’s biggest economic reform as it replaced more than a dozen federal and state levies and unified Asia’s third-largest economy.

But its chaotic implementation and complexities — months after a shock ban by Modi on high-value bank currency aimed at unearthing untaxed wealth — badly hurt small businesses and led to millions of job losses in the cash-driven economy, presenting the biggest challenge to Modi’s re-election chances.

India,India, elections, BJP
India’s Congress party President Rahul Gandhi displays documents in New Delhi, India. VOA

 

Gandhi, scion of India’s Nehru-Gandhi dynasty, said during a visit to Dubai that foreign investment was at a multiyear low in India because of the “ill-advised and badly thought out economic moves” such as the currency ban and a “poorly designed GST.”

Quick growth promised

“We will take some rational economic decisions,” he told a press conference, which was broadcast live on Twitter. “We will restructure the GST and we will embrace investments from the Middle East and other parts of the world. We are the party of [India’s economic] liberalization; we are the party that gave the fastest economic growth in the first decade of the century, and will do that again.”

He said his main priority would be to create jobs, simplify the GST, rebuild confidence in institutions such as the Reserve Bank of India — whose governor resigned recently after a fight over autonomy with the government, and the Supreme Court.

Modi, election
Indian Prime Minister Narendra Modi, center, is garlanded by BJP leaders on the first day of the two-day Bharatiya Janata Party national convention in New Delhi, Jan. 11, 2019. VOA

 

Four Supreme Court judges held a rare press conference early last year, saying that “unless this institution is preserved and it maintains its equanimity, democracy will not survive in this country.”

Modi told a BJP convention in New Delhi on Saturday that for Congress “every institution was wrong and only they were right.”

The Congress press conference was organized by the Indian Overseas Congress, which is present in about 35 countries, as Gandhi tries to reach out to rich Indians living abroad for funds and social media support for the party that has dominated the country’s politics for decades before being nearly decimated in the last general election in 2014 by Modi.

But back home, Gandhi received a jolt when bitter rivals, the Bahujan Samaj Party (BSP) and the Samajwadi Party (SP), announced an election tie-up without Congress in Uttar Pradesh state, which sends the highest number of lawmakers to the lower house of parliament.

Narendra Modi, India, election
Elaborate preparations for PM’s election rally. VOA

“The BSP and SP have made a political decision,” Gandhi said. “It’s on us on how to strengthen the Congress Party in Uttar Pradesh and we will fight with our full capacity. Whether we do or their alliance does, the BJP is not winning there.”

Also Read:China, India Keen on Joint Ventures For e-vehicles

Modi said at the Delhi convention that the opposition was working on a “desperate alliance,” while the BJP would give a “strong government.”

The Hindu nationalist BJP lost power in three key states recently, forcing the government to announce a flurry of measures to woo small businesses and the less well-off since then. (VOA)