One of the most globally recognized sectors, the Real Estate in India is the second largest employer after agriculture. The real estate sector involves four major sub sectors – housing, retail, hospitality, and commercial. The growth of this sector is well integrated by several factors: geographical condition, weather, transportation and connection with other cities and places. The growth of real estate also enhances employment, educational facilities, hospital, shopping malls, accommodation and self-employment.
It is also expected that this sector attracts more non-resident Indian (NRI) investments in both short term and long term. Bengaluru is the most desirable property investment destination for NRIs. As the investors are not only observant to the real estate’s hubs like Gurgaon, Delhi, Noida, Faridabad, Pune, Mumbai, Ahmedabad, Goa, Hyderabad, Chennai and Kolkata, other cities and places are also evolving with new plans and trending smart cities. This constant growth of real estate sector is focusing on places like Surat, Jaipur, Raipur, Lucknow, Indore and other developing cities into high demands to be residential or commercial, considering the surrounding factors of the place.
In few past years, India has witnessed new developing trends in various sectors and industries. The growth of sectors such as IT and ITeS, retail, consulting and e-commerce have registered high demand for office space in recent times. Bengaluru has recorded the highest net office-space absorption for the past few years. This commercial sector can highly influence the residential and retail demand in that particular place. Housings contribute averaging 15-18% in GDP which includes residential investment and consumption spending.
Tech Meets Real Estate Industry
The recent tech-enabled real estate which is speedily viable to make India one of the fastest originating realty tech harbors in the world. The compelling realty tech is all set to revolutionize the sector with their innovative approach. Be it in consultancy, sale-purchase, investment, after sale services or any other plot related assistance; tech startups have agitated the primary real estate market and reformed the business. The simple property search, legal aid, safe possessions and purchase accessible made it possible to expand in the market. Registering on the website, the buyers can get a virtual property viewing sitting at home. It’s difficult to visit ten projects before making a final call to invest into one. But the virtual display can show a number of various projects in no time and you can shortlist them by viewing as many times as possible. Introducing rent or lease activities online has also proved to be beneficial for the migrants to settle in the new city. This way they can search for any homestead or apartment in different cities.
Reaction to the New Taxation
The Goods and Services Tax or GST is a great booster for the industry. GST will seek to restore buyer and investor interest by bringing more transparency in the taxation. The sector is ready to improve the prices that are likely to drop around one to three percent. Previously, the taxation was too convoluted for buyers who were liable to pay taxes depending on the construction status of the property and the state where it is located. The total tax amount was divided into value added tax, service tax, stamp duty and registration charges on investing an under-construction property and for the completed property, the tax applicable were stamp duty and registration charge. Moreover, VAT, stamp duty and registration charges were state levies so each state stated its figures on their own. Service tax was charged on the stage of construction by the central government. So the calculation of taxes was very tedious in the earlier regime. GST charges all under-construction properties at 12 per cent of the property value excluding stamp duty and registration charges. No indirect tax is applicable on sale of ready-to-move-in properties hence the tax will not apply to those. The biggest outcome of GST is the simple tax that applies to the overall purchase price.
Earlier, VAT and service tax is used to account for nearly nine per cent of the property value. Since that will be lower by the GST applied to the sector, the price reduction benefit is enjoyable by the buyer and the builder. The developers were also charged for Central Excise Duty, VAT and entry taxes collected by the state on construction material costs. Further, they had to pay a 15% tax on services like labor, architect fees, approval charges, legal charges etc. which was eventually transferred to the buyer. However, under the new simpler tax system, reduced cost of logistics will result in reducing expenses hence increasing the profit margins.
The Bright Future of the Industry
The simple taxation is not only a perk for the low price but also the delay in construction has been wiped out. The entry taxes collected by the state during the transportation are excluded, consequently, the crossing with the construction materials inner the states are accelerated. The decreased rates of interest on housing and business loans give a positive desire for the industry. Mumbai is considered to be the best city in India for commercial real estate investment, expected with returns of 12-19 per cent likely in the next five years, followed by Bengaluru and Delhi-National Capital Region (NCR). The real estate sector in India is expected to attract investments worth US$ 7 billion in 2017, which would rise further to US$ 180 billion by 2020. The growing percentage in India and the greater domestic consumption is driving India’s improvement, implying the middle class to come and demand their suitable housing. As the foreign investors are supplementing for the last three years, it has topped the popularity for yield, something to find in high-priced “gateway cities,” leading them to explore more-speculative plays and also to enhance business.
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