Surging Ahead

In 2016, there have been several remarkable sustained improvements in the real-estate sector that gave boost to the Indian economy as well. There were a few positive conclusions like Goods and Services Tax (GST)which got unanimous approval of both houses of parliament last monsoon session and the Real Estate (Regulation and Development) Act, 2016 (RERA) which has already been notified by three states and five union territories, till date.Another big step taken by the Central Government in the foregoing year was of demonetisation which is expected to rectify the real-estate prices in the market and optimize chances to bring the sector at par with the international standards. The Securities and Exchange Board of India (SEBI) has recommended easier regulations for Real Estate Investment Trusts (REITs), such as raising the cap of investment of REITs’ assets in under-construction projects from 10 % to 20 %, so as to attract the interest of the developers, and also to make plans to relax the rules for foreign fund managers to relocate to India.Recently, on January 11, 2017 it was reported that SEBI issued amendments to the REIT Regulations of 2014, which now identifies Royal Institution of Chartered Surveyors (RICS) certified professionals specializing in valuation of fixed assets as competent professionals to execute valuation of REIT assets. The Reserve Bank of India had carried out necessary amendments in Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Eleventh Amendment) Regulations, 2015 for permitting investment by Foreign Portfolio Investors (FPIs) in the units of REITs, Infrastructure Investment Trusts (InvITs) and Alternative Investment Funds (AIFs). SEBI has now allowed FPIs to make investments in units of REITs, InvITs and category III of AIFs, permitting them to acquire corporate bonds under default as well. As of now, the Central Government is trying to strengthen the institutional framework by paving way for the impactful implementation of the Benami Transactions (Prohibition) Amendment Act, 2016 that recently came into force on November 1, 2016. The efforts have been made to make real estate transactions more transparent, to bring about consistent improvements in structural reforms and for liberalisation of the Foreign Direct Investment (FDI) policy. Further, the legal reforms in India are now directedat addressing issues like evasion of taxes, corruption, banning of illegal benami transactions with stricter punishments and fines, etc. Though legal, political and economic developments seem to have cleared the hurdles for the buyers but the slow implementation, criticism, non-acceptance by various states of the new laws like RERA have led to a few torments and upheavals in the real estate sector, hindering its progress. However, with some of the key policy changes in 2016, the outcome is likely tointroduce stringent regulations, superior transparency, increase in price stability and higher affordability in the real estate sector which will attract FDI, External Commercial Borrowings (ECBs), REITs, investment from business houses and customers and Non Resident Indians (NRIs).The developers have started to revamp their accounting and management systems to meet international due diligence standards for the purpose of attracting funds. Conclusively, the year 2017 will have a mixed impact on the sector from various perspectives, like developers’, home buyers’, the state governments’, etc. as GST will bring about a lot of changes in the industry which is currently suffering from myriad of indirect taxes. On one hand, a move like demonetisation has almost put the sale transactions onmute due to its slow pace,on the other hand, a welcome enactment likeRERA has given a common platform to all those who are stakeholders in the real estate business. In all likelihood, RERA may regulate the real estate sector and bring in clarity for both buyers and developers. Last but not the least,amendments in the Benami Transactions (Prohibition) Act, 1988 may leadto a large number of land inventory becoming available to the Government and to the private sector, eventuallyresulting in fast-tracking of affordable housing plans for the poor, once the process is over.     Sudhir Mishra Founder & Managing Partner Trust Legal, Advocates & Consultants sudhirmishra@trustlegal.in.