When it comes to regulatory interventions, the real estate sector drew 'fire' but failed to 'display growth', feel experts, pointing out that the coming year may not be all that bad as the seeds sown in 2019 are expected to bear fruit in 2020.
Here are some policy interventions taken by the government in 2019:
- GST rates slashed for affordable housing
In February, GST Council slashed GST rates to 5 percent for under construction flats and 1 percent for affordable housing
- Subvention schemes banned
In July, the National Housing Bank advised housing finance companies to refrain from giving loans for under construction projects that are under the subvention scheme in view of complaints of fraud
- First-time homebuyers get further tax deduction
On July 5, Finance Minister Nirmala Sitharaman raised the tax deduction limit to Rs 3.5 lakh on interest paid on housing loan sanctioned during the fiscal for purchase of first house worth upto Rs 45 lakh, a move aimed at boosting affordable housing segment
- NBFC debacle and steps taken to infuse liquidity
In August, the government announced additional Rs 20,000 crore liquidity support to struggling housing finance companies to improve their lending capacity. This was in addition to the Rs 10,000 crore support announced earlier by the housing sector regulator National Housing Bank
- RBI reduces repo rate by 135 bps
The apex bank reduced repo rates by 135 bps all through the year and mandates that banks link home loan rates to it
- Mandatory for banks to link loan products to RBI repo rate
The government announced that banks would link loan products to external benchmark or RBI repo rate. The move was aimed at reducing EMIs for loan borrowers
- Rs 25,000 crore special opportunity fund created for help complete stalled projects
Fund created by the government to provide last mile funding to stuck real estate projects to help in completion of stalled projects thereby improving buyers’ confidence.
- Draft model tenancy law proposed
The draft model tenancy law that proposes to establish an independent authority in every state and Union Territory for registration of tenancy agreements and even a separate court to take up all tenancy-related disputes.
- Homebuyers get status of financial creditor under IBC
Flat buyers legally recognised as being at par with banks and other institutional creditors for recovering their dues from real estate firms that have gone bankrupt.
- The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019
On December 12, 2019, another bill was introduced in Parliament titled The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019. The Lok Sabha has referred the Second Amendment bill to a standing committee on the 23 December 2019. The standing committee has three months to submit its report before the Lok Sabha. The Second Amendment bill specifically seeks to add a proviso to Section 7 which provides minimum thresholds for initiating insolvency proceedings.
Real estate experts say that implementation of the Rs 25,000 crore stressed fund should be put on fast track in 2020 to improve buyers' confidence. Implementation of liquidity boosters for NBFC sector also a must going forward. Rera too should be implemented in letter and spirit, they say.