In the recently concluded elections in India - the world’s largest democratic country – The Bharatiya Janata Party (BJP) and its allies have emerged as the single largest coalition and will be forming the government at the centre. This also marks the rise of Narendra Modi (formerly the Chief Minister of Gujarat – a western Indian state) as the national leader, who will shortly be taking his oath as the 15th Prime Minister of India.
Basis the election manifesto from the BJP, with them forming the Government, Cushman & Wakefield in India expects some noticeable changes in the politico – economic conditions of India.
General Impact on Real Estate in India
In the analysis on the overall impact the new government can have on India’s real estate market Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield says, “The positive impact of the recently concluded election will be dependent on the emergence of a stable government that is able to take and implement policy decisions unfalteringly once the results are out. A new government at the centre is expected to provide a new direction and guidance to core policies that will have direct and indirect impact on the sector. A majority government will have an overall stronger impact on policies viz-a-viz a coalition government. With the legislature and the executive getting back to the business of governance for the next 5 years, investments in various businesses and sectors of the economy is expected to pick up pace, all of which will generate more demand for real estate assets. A stable government will lift the sentiments of the investor community who have a strong impact on housing and office sales. Hence, both end-users and investors are expected to increase their investments in the sector and contribute to its growth.”
Urbanization and Infrastructure Development
With the formation of a new BJP led government next week, the real estate sector now expects the focus to shift to the expansion and development of infrastructure such as highways and roads, ports, railway lines, manufacturing hubs, dams, canals and irrigation channels, etc which will also lay the ground work for developing the 100 new urban centres that serve as twin cities or satellite towns. Only around 31% of the population lives in urban India, which is already grappling with issues pertaining to crowding, strained infrastructure, pollution, expensive real estate, etc. Hence, there is an immense need for new growth corridors and urban centres that cater to the needs of the increasing population from rural India that is migrating to urban India in search of a better quality of life. From a sustainability point too, the Government needs to aggressively pursue its agenda of developing new urban centres as mere expansion of existing ones is not yielding the desired results.
Sanjay Dutt says, “The creation of and boost to demand for real estate will be an incidental byproduct of the process of development and urbanisation; creation of job opportunities that secure the livelihoods of the hugely underprivileged population whilst providing better access to basic necessities such as housing, water, electricity, medical facilities, education, etc will be the major successes of such an initiative. To achieve these objectives, the Government needs to follow a well thought of and implemented plan that allows speedy execution of projects through single window clearances, access to cheap funding and raw materials, etc. Without these in place the objectives will remain on paper, which given the past track record of the new Prime Minister should not really be a concern.”
What Global Investors can expect?
On the expectations that foreign investors and businesses have with the new Modi Government, Sanjay Dutt commented, “Foreign businesses and investors wishing to invest in India would like the new government to maintain an informed and committed approach to foreign investments; implementation of General Anti Avoidance Rule (GAAR) with retrospective effect on foreign-owned businesses, imposition of Minimum Alternative Tax (MAT) in SEZs, flip flops on FDI in multi-brand retail, delayed implementation of Goods and Services Tax (GST), Direct Taxes Code (DTC), etc are perceived negatively by the international investors and affect the inflows of much needed capital. They would also like Modi to introduce policies that promote economic growth, stabilise the currency and also implement necessary legislations on Real Estate Regulation and REITs that will bring in higher level of transparency by curbing malpractices and boost growth by providing better avenues for investment capital."