Developers Must Rise To Their Full Height To Shine In 2018

Time heals all wounds, they say. That is exactly what real estate developers in India are hoping for as we enter 2018. Key reforms that have been introduced in the past one year left several of them bleeding and struggling for survival. Revolutionary changes do come at a cost; they have as their signature some short-term pains that might make one writhe until it is business as usual again.  The New Year, we hope, would help leave behind the memories of disruption caused in India's real estate sector after the implementation of the note ban, the real estate law and the goods and services tax (GST).

How does the sector spring back to its feet?

Clarity we need

Neither homebuyers nor developers have so far been able to get the benefits that they are promised under the two key legislation, the Real Estate (Regulation and Development) Act, 2016, and the GST. Under the real estate law, developers will have to deliver what they promised the homebuyers. Time and again, the government reminded the developer community to be ready to survive in a new and reformed environment when plans of implementing the law were still in the works. Those who really worked hard to make themselves RERA-compliant may still be waiting for the right infrastructure to operate in. For that to happen, states will have to set up their respective Real Estate Regulatory Authority (RERA) and build an infrastructure, something which several of them have not been able to attain so far.

The same is true of the GST, too.

Nearly six months have passed since the new tax regime came into force. However, talks are still on to decide whether the real estate sector would be brought under its purview. So far, under-construction properties are taxed at 12 per cent through work contracts; the sector is not directly under the cover of the GST. Once there is a clarity on the matter, buyers will be more willing to buy and developers will be in a better position to pass on the benefits of the new law.

Of right turns and straight paths

At present, there are no beelines to buy property — home sales fell 18 per cent in the second quarter of the current financial year, an annual analysis by PropTiger DataLabs show.

This resulted in developers opting for distress sale of units to be able to survive. Those who could not deal with that were forced to go insolvent — Amrapali, Jaypee and Unitech are staring at that kind of a future. In a lugubrious atmosphere such as this, the government is also making plans to tax the unsold inventory lying with developers for over a year. If efforts are not made to improve the buyer sentiment simultaneously, a great deal of chaos might be caused within the sector, resulting in a complete failure. Considering that real estate is the second-biggest employment generator in India, next only to agriculture, care must be taken to revive consumer confidence. This will enable developers to sell property and keep away from insolvency proceedings. The falling of the giants is certainly no good news for the economy, either.

The heavy-handed approach

The pressure on developers has grown many times over in the past years, with the judiciary joining forces with the government to go after erring players. At times, developers have had to pay the penalty on behalf of bad weather, too.

Sample this: After the air pollution levels hit hazardous levels in Delhi in November, a ban on construction activities was imposed in the national capital region. Apart from the fact that this ban caused delay in project works, it also amounted to monetary losses to developers. A similar ban was imposed on construction in the region in the winter of the previous year as well.

While preserving the environment is of utmost concern, we can certainly do better than going for knee-jerk reactions. Efforts to guard the atmosphere have to be made all through the year and by all parties concerned. Penalising a few would certainly not do much good. New measures should also be put in place frequently to maintain the ecological balance. They, in turn, slow down the speed of construction. Also, in the light of such facts, it might not be justified to entirely blame developers for delays in project completion.

Striking the right sentimental cord

New legislation are put in place to make things easy for all parties concerned in a property transaction, developers included. However, one cannot help but notice the “negative pitch” with which these laws are marketed ─ conspicuously, the developer community is held in contempt for delaying projects and duping buyers. While there is no denying the fact that all those accusations were true in many instances, painting the story with a broad brush is certainly unfair. No stories are told about those developers who kept their promises and impressed their buyers. If the real estate law guarantees buyers protection against defaulting developers, it also guards developers against erring homebuyers. Not one party can be the hero in this story; not one party can be the villain. It would be better to strike a new cord, a positive one to be specific, to make sure the New Year starts and ends on a happy note.