Real Estate industry’s post budget analysis

By Accommodation Times News Service

Surabhi Arora, Associate Director, Colliers International
 Honorable Finance Minister with the pretext of development of smart cities has proposed changes in FDI for real estate sector. The reduction in built up area from 50000 sq mtr to 20,000 sq. mtr, and minimum capitalization from 10 million to 5 million is definitely a positive move for real estate sector. The reduction in built-up area and size of projects will allow mid-sized and smaller developers with good track records better access to FDI and boost affordable housing in the country.

The capital component is of paramount importance, the introduction of REITs would be beneficial for the Indian market as they not only provide efficient access and flexibility to raise capital but also provide an alternative exit option to investor. The introduction of REITs in India would spell scores of opportunities for developers / private funds / financial institutions, etc. as they can be used as an exit vehicle to rotate funds as per the requirement. REIT have the potential to solve several issues that act as an impediment to growth of the economy pertaining to transparency, credit crunch, organization of the property market sector, liquidity of real estate assets and execution of property developments across the country, which would help build infrastructure. REITs’ introduction in the Indian market would not only offer the much-talked-about benefits but also many long-term benefits. If we look at the prevailing situation in the real estate industry, one of the problems that have been ailing the industry for a long time is non-aligned market prices of property to their registration basic values. It causes revenue loss to the government and the differential between actual prices paid for the property and the disclosed rates at which registration is done, gets absorbed in the black economy.

 

Kishor Pate





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