Elections 2014: Indian real estate awaits proactive govt

Even if the next government proves to be 'real estate friendly', it has its work cut out for it. There are vital regulations and initiatives related to real estate that have been gathering dust on bureaucratic tables which need to be fast-tracked and implemented.

Like most other business sectors, the Indian real estate market holds its breath for a stronger and more determined government. The perception which is currently driving market sentiments is that market momentum can either accelerate, remain unchanged or decelerate depending on which party is voted into power. Speaking purely from the viewpoint of market sentiment, there is some validity to this perception. However, the fact is that the true benefits of political stability and proactive reforms - if these indeed ensue - will not be visible or tangible for quite a while after the new government takes over.

Even if the next government proves to be 'real estate friendly', it has its work cut out for it. There are vital regulations and initiatives related to real estate that have been gathering dust on bureaucratic tables which need to be fast-tracked and implemented. Though these regulations and initiatives are crucial for the real estate sector's growth, there are various complexities that must first be sorted out. One of the challenges is impartially attending to the interests of all industry stakeholders. The other challenge is to shore up all loopholes that could remain and be exploited if not identified prior to a regulation's implementation.

This is especially true of the pending Real Estate Regulatory Bill, which has been hotly contested at every stage. There is no doubt that it must be enacted sooner rather than later so as to make Indian real estate more attractive for foreign investors. However, it does appear that no version of this Bill that emerges after the various objections and arguments from the industries stakeholders have been considered will be accepted across the board. If this is the case, it will require a strong and determined government to push it through. This also applies to the regulations pertaining to FDI in multi-brand retail - a subject that has drawn an incredible amount of political flak - which would have a major impact on India's attractiveness as a destination for foreign retail heavyweights.

Developers have been campaigning for a faster project approval process, and this is justified but by no means easy to do. Again, the government faces the challenge of ensuring that any fast-tracked approval process does not result in misuse and exploitation. While faster approvals would boost the supply pipeline and help bring prices down, the government must also ensure that construction quality norms are not compromised in the process. Also, faster approvals could result in the provision of support infrastructure falling several more laps behind while newer precincts are being developed.

That said, swifter and more determined decision-making than what we have seen so far is definitely of the essence. Many overseas investment funds have so far abstained from the Indian real estate market because of the lack of regulation, political instability and bureaucratic quagmire. The new government will have the opportunity of making Indian real estate more investment-friendly and attractive, and this would go a long way in meeting its considerable capital requirements. Investor-friendly, streamlined policies from the new government can be a game-changer for Indian real estate. Expectations: The industry expects the new ruling government to be less dependent on smaller coalition parties for support A clear electoral mandate will help real estate investors to obtain clarity on future policies, which is critical while making future business plans The industry expects REITs to become operational in India so as to increase liquidity The industry expects the approval and implementation of the pending Real Estate Regulatory Bill

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Andhra CM Kiran Reddy stages protest at Jantar Mantar against his own party

NEW DELHI: The drama over the formation of Telangana scaled new heights on Wednesday with Andhra Pradesh chief minister Kiran Reddy staging a sit-in protest in the Capital while a harried government weighed the option of a voice vote to pass the contentious legislation.

The CM doing an Arvind Kejriwal at Jantar Mantar seemed even more bizarre as Reddy was opposing his own Congress party's decision to form Telangana.

The task of getting the Andhra Pradesh Reorganization Bill through Parliament looks more challenging as Reddy set an unusual precedent by leading the anti-Telangana stir even as Congress pledged support to the new state.

While Reddy and some of his cabinet colleagues protested, Seemandhra MPs from Congress, YSR Congress and TDP disrupted Parliament, forcing adjournment of Lok Sabha followed by Rajya Sabha.

It is learnt that Telangana Rashtra Samithi leader K Chandrasekhar Rao has urged the government to pass the bill by a voice vote, arguing that bills to create Uttarakhand and Jharkhand were passed in a similar manner.

Government sources said the voice vote route could be an option as the Telangana bill is not a constitutional amendment, but senior Congress leaders remain cautious, pointing to vehement opposition to the new state.

However, the political directive to Congress floor managers is clear enough. "The next Lok Sabha will have 17 MPs from Telangana and 25 MPs from Seemandhra, the die seems cast," said a minister.

The bill is expected to be cleared by the Union Cabinet on Thursday with a group of ministers having finalized a draft.

BJP reiterated that it will oppose marshalling out of anti-Telangana MPs and also demanded that the two Houses must be in order when the bill is considered, conditions that Congress felt were aimed at delaying the bill.

Meanwhile, TDP leader N Chandrababu also reached the capital to oppose the Centre's "unilateral" decision to create a new state without adequate consensus. "The Centre must take the states into confidence. But the Centre is violating all this and that is not correct," he said.

Official sources said a TDP delegation led by Lok Sabha MP Nama Nageshwar Rao expressed readiness to support the bill. Rao represents TDP MPs from Telangana region.

With the government planning to bring the Telangana bill to Parliament, possibly Rajya Sabha first, on February 12, emotions are coming to a boil with supporters of both camps coming close to blows at Andhra Bhawan on Wednesday.

The heated exchanges between Telangana and Seemandhra MPs in Parliament also threaten to spill out of hand forcing the government to consider tough action like seeking the suspension of anti-Telangana MPs.

Though government managers are cagey in spelling out plans for disciplinary action, saying the matter is for presiding officers to decide, passing the bill in the presence of Seemandhra MPs seems a rather fraught task.

The noisy and chaotic start to the continuing winter session did not bode well for transaction of business and finance minister P Chidambaram admitted as much while addressing a business conclave, saying he doubted if Parliament will pass any law.

"We have to go through the ritual of attending Parliament every day and come back empty handed," Chidambaram said.

Prime Minister Manmohan Singh was more optimistic, saying "hiccups" over Telangana would subside. "I think these are hiccups. I hope all sections of the House will have the wisdom to set aside these prejudices and create an atmosphere conducive to harmonious working of the House," he said.

But the situation does not look promising for the government, as tough action like suspending anti-Seemandhra MPs will only increase the bitterness over the formation of Telangana.

While BJP is not making things easier for the government, the Congress will end up losing face on both sides of the Telangana divide if it backs out at this stage.

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Pressure on farmland

The government, it appears, is yet to find ways to address conflicting demands on land. Instead of quickly charting a comprehensive approach to land utilisation, it continues to speak in different voices and at cross purposes. The latest addition to the policy confusion is the move to consider Foreign Direct Investment (FDI) in agricultural land bought for real estate purposes. Existing Foreign Exchange Management Act regulations prohibit the use of FDI funds to buy farmland. However, real estate companies have tried to bypass these restrictions. Last year, the Enforcement Directorate imposed a fine of Rs. 8,600 crore on Emaar MGF for allegedly using foreign funds to buy agricultural land. The Ministry of Urban Development now wants to ease these restrictions, and the government has constituted a three-member Cabinet committee to look into it. The reasoning behind this move is that 100 per cent FDI is already permitted in developing townships, housing and other infrastructure projects. Hence, it would be only logical to extend it and allow the purchase of agricultural land for construction purposes. The other arguments are that restrictions create bottlenecks and delay projects, and that buying of agricultural land on the outskirts of a city is inevitable and necessary. 

On the face of it, relaxing FDI norms may appear to be a rational step, but in the absence of a clear-cut land use policy and plans, it will hasten unrestricted acquisition and unplanned conversion of farmland and lead to hoarding of land. In 2013, the Ministry of Rural Development published a draft National Land Utilisation Policy. It convincingly argued that the shrinkage of per capita ownership of agricultural land and the demand to produce more food — 245 million tonnes in 2013 to 307 million tonnes in 2020 — necessitates the protection of fertile land. The National Policy for Farmers, announced in 2007, insisted that the government conserve productive land and allow any change in use only under “exceptional circumstances.” These two policies make no distinction between foreign and local investment. The government has not acted on a recommendation to revive land use boards, which could provide guidelines to State governments. Nor has it implemented the idea of delineating and integrating land utilisation zones under the development plans. These measures are necessary to map the availability of land and coordinate demands for it. It is imperative to correct any institutional deficiencies and strengthen local level land-management plans to ensure an orderly process of urban development and prevent detrimental effects on agriculture and environment.

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Posted in: Economic Times,Emaar Mgf,Emaar MGF penalty,farmland protection,FDI in agricultural land,Hindustan Times,National Land Utilisation Policy,National Policy for Farmers,real estate mafia