Read More: Real Estate Act Comes Into Effect From Today Read More: Buyers Can Stop Payment To Builders If Construction Milestones Are Not Met

AFTER THE DEMONITIZATION CHANGES IN REAL ESTATE
BUSINESS
The real estate sector was in the news all through the year, with the
government announcing several major policy initiatives such as the
passage of the Real Estate (Regulation and Development) Act 2016 and
the amendment to the Benami Transactions Act. But the most talked about
was the demonetisation of Rs 500 and Rs 1000 currency notes used mostly
for real estate transactions.
Some policy initiatives listed by international property consultants Colliers

Research included the following 10 policy initiatives
1) Real Estate (Regulation and Development) Act, 2016: The Real

Estate (Regulation and Development) Act, 2016 which came into force in
March 2016 has laid down a regulatory framework which will change the
way the real estate sector operates in India. It aims to enhance
transparency, bring greater accountability in the realty sector and set
disclosure norms to protect the interest of all stakeholders. Speedy
execution of property disputes will also be ensured in due course .
Read more: Real Estate Act comes into effect from today
Read more: Buyers can stop payment to builders if construction milestones
are not met
2) Amendment to the Benami Transactions Act: The Benami
Transactions (Prohibition) Amendment Act, 2016 lays down stringent
rules and penalties associated with dealings related to ‘benami’
transactions. It establishes a regulatory mechanism to deal with disputes
arising from such transactions and levying penalties to increase the
institution-investor participation and regulating the sector to make India an
attractive investment destination.
Read more: Exit from benami properties to be tough after demonetisation
drive
3)100% deduction in profits for affordable housing construction: To
promote affordable housing, the finance minister proposed 100%
deduction in profits to an undertaking from a housing project for flats of
up to 30 sq metre in four metro cities and 60 sq metre in other cities. These
projects have to be approved during June 2016 to March 2019. Another
condition was that the project should be completed within three years of
grant of approval.
4) Interest subsidy for first-time homebuyers: To stimulate housing
demand from first- time home buyers, the Union Budget 2016-17 also
proposed deduction of additional interest of Rs 50,000 per annum for first-
time home buyers for loans of up to Rs 35 lakh sanctioned during the next
financial year for houses with a value not exceeding Rs 50 lakh. This
move should positively influence home sales in non-metros in the long
term where residential product prices are not as high as those in metros.
5) Change in arbitration norms for construction companies: To help
the ailing construction sector, the government has cleared reforms
including speedier resolution of disputes and the release of 75% of
amounts that are stuck in arbitration. The government will now release
75% of amounts against margin-free guarantee in cases where arbitral
awards have been given but have been contested. The amount released will
be used by contractors to complete projects or pay off debts. This is aimed
at improving the cash flow position of large developers who have
significant exposure in infrastructure and government contracts and
eventually help in speedy execution of large infrastructure projects.
Coming at a time when most developers are struggling with liquidity
issues, this is a boon from an overall perspective..
6) Service tax exemption on construction of affordable housing:
Exemption of service tax on construction of affordable houses of up to 60
square metre under any scheme of the Central or state government
including public private participation or PPP schemes will propel
construction in affordable segment across India and encourage greater
collaboration between the public and private sector as well as participation
in affordable home construction.
7) DDT exemption for SPVs to REITs: The Union Budget 2016-17
exempted any distribution made out of the income of the Special Purpose
Vehicles (SPVs) to the Real Estate Investment Trusts (REIT) and
Infrastructure Investment Trusts (InvIT) from the levy of Dividend
Distribution Tax. This paved the way for the REIT model to become
financially viable for retail investors.
8) Implementation of Goods and Services Tax structure: Goods and
Services Tax (GST) is a positive move towards simplification of Indian tax
system. However, the real estate industry is still awaiting clarity on which
items fall into “sin” and “common use” and whether they will attract 18%,
or 12% possible tax rates. Additional clarification is also needed if the
implementation of GST will subsume existing service tax and Value
Added Tax (VAT), which are levied for under construction projects
currently.
9) Currency demonetisation of 500 and 1,000 rupee notes: The recent
demonetisation of Rs 500 and Rs 1,000 rupee notes by the prime minister
is perceived as a significant reform. In the long run, this measure along
with Real Estate (Regulation and Development) Act, 2016 (RERA) will
align the real estate sector to the international standards of doing business,
resulting in more fund flow from institutional investors, banks and higher
unit sales.
Read more: 50% fall in queries by homebuyers, sales slow after
demonetisation
10) Permanent Residency Status for foreign investors: The Union
Cabinet approved the grant of Permanent Residency Status (PRS) to
foreign investors, subject to various conditions and with a provision for
renewal for another 10 years. As PRS allows the holders’
spouse/dependents to take up employment in India, as well as the purchase
of one residential property for end-use, the end user pool, mainly for high-
end and luxury segment products stands increased which can promote the
asset class in a big way.

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AFTER THE DEMONITIZATION CHANGES IN REAL ESTATE

Some policy initiatives listed by international property consultants Colliers

1) Real Estate (Regulation and Development) Act, 2016: The Real

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