2014: The year that was for Indian real estate

The passing year 2014 was the year of promises for Indian real estate because it brought some action in the market that was dull since a long time. Not only it brought hope of revival, but also brought some policy presents that set the path rolling for the real estate market. Here is a look at the top five factors that impacted real estate in 2014.

The 100 smart cities

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Soon after the NDA government came into power in May 2014, the buzz around ‘Smart Cities’ started building up. Throughout the year 2014, the Indians heard, read and discussed about Smart Cities. There seemed to be a fresh solution and direction to the crumbling urban infrastructure in India. In his maiden budget, Finance Minister Arun Jaitley set aside a token money of Rs 7,060 crore for the development of 100 Smart Cities in the country by 2022. With the “pace of migration from the rural areas to the cities increasing, unless new cities are developed to accommodate the burgeoning number of people, the existing cities would soon become un-liveable,” Jaitley’s Budget statement highlighted the government’s vision and ambition.


In October 2014, the government issued a draft on Smart Cities explaining the concept, its pillars such as Information and Communication Technology (ICT), other key features such as water, electricity, transport, solid waste management, storm water drainage, health infrastructure and more. The government also highlighted the role of the private sector. The concept note issued on this scheme by the Urban Development ministry mentions that cities with a population ranging between one and four million would be the most appropriate to develop as smart in the near future. “Greater involvement of the private sector in the delivery of services is another instrument as it enables higher levels of efficiency,” the draft noted.

The government also studied the overseas models of Smart Cities and countries such as America and Singapore offered to help develop these in India. In November, the government eased the norms for FDI in the construction sector which is seen as a major step towards Smart Cities. The government is also expected to soon come up with a cabinet note on policy changes.

The year 2014 began with a dull market and the real estate sector complaining about lack of funds liquidity. After the Narendra Modi Government came to power at the centre, a few steps were taken to ease the flow of Foreign Direct Investments (FDI). So far the banks were the only source of credit for the real estate developers and thus, the cost of debt was increasing day by day. Moreover, since India is still not ready for Real Estate Investment Trusts (REITs), FDI is a more feasible option.

In October, the Centre relaxed the rules for allowing FDI in the construction sector, including housing, by reducing the minimum built-up area and capital requirement for foreign investment in projects. Experts believe that easing of norms to exit by foreign investors is expected to send the right signals for doing business in India because of the investor-friendly regulatory practices. Although, since 2005, 100 per cent FDI was allowed in townships, housing and built-up infrastructure and construction developments, the government had imposed certain conditions. As a result, FDI in these sectors was not taking off.

In December, the revised norms relating to Construction Development Sector were notified by the Department of Industrial Policy and Promotion (DIPP). Now, India allows 100 per cent FDI in the sector through automatic route. This policy was the need of the hour as due to the depleting FDI inflow in construction and real estate sectors in the past couple of years, the government had reduced the minimum floor area to 20,000 sq m from the earlier 50,000 sq m. The minimum capital requirement is now USD 5 million brought down from USD 10 million.

Housing for All

India, which has a rapidly growing population and no substantial infrastructure, needs a concrete policy that can promise its people a house to live in. After the Modi Government came to power this year, it launched its mission of “Housing for All by 2022”. The mission has provided hope to the economically weaker section for whom owning a home in today’s time is a distant reality.

In the Union Budget, Finance Minister Arun Jaitley announced that the government is committed to endeavour to have Housing for All by 2022. While presenting the Union Budget, the Minister tried to maintain a balance and aim to bring down the fiscal deficit to 3.6 for the FY15-16 and retain it at 4.1 for the current FY14.

An incentive for affordable housing loans of Rs 4000 crore was announced for the urban poor and weaker sections of the society through the National Housing Bank (NHB) with a view to increase the flow of cheaper credit to the urban poor/EWS/LIG segments. The Minister also proposed to add the inclusion of slum development in the list of Corporate Social Responsibility (CSR) activities to encourage the private sector to contribute more.

In Municipalika conference in Ahmedabad and CREDAI and NAREDCO Conclave in Delhi, M Venkaiah Naidu, Minister of Urban Development and Housing and Urban Poverty Alleviation, said that in order to provide Housing for All, the government will soon launch an urban housing mission named after Sardar Vallabhai Patel by merging and improving existing housing schemes such as JNNURM, Indira Awaas Yojana and Rajiv Awaas Yojana.

Real Estate Regulation Bill

The Central government has tabled the Real Estate (Regulation & Development) Bill, in the Parliament in the Winter Session which is currently going on. With this, the ruling government has infused some positivity in the real estate market. In a major concession to the real estate sector, the housing ministry has proposed to allow builders to divert up to half the amount collected from a buyer for a specific project to other projects.

The past bill drafted by the previous UPA government, had a clause where the developer directed to put 70 per cent of the amount collected for a project from the allottee/buyers/consumers to an escrow account to be used only for construction of that project. The industry has been requesting the dilution of this particular clause. In the winter session of Parliament, the mandated escrow amount per project has been now been reduced from 75 per cent to 50 per cent.

Source:http://content.magicbricks.com/industry-news/delhi-ncr-real-estate-news/2014-the-year-that-was-for-indian-real-estate/79871.html