THE UPCOMING ORGANISED REAL ESTATE SECTOR IN INDIA
This article is in continuance of my previous article “Modi Trumped Donald on Demonetization”. In this article, I’ll be focusing on estate planning for NRIs or investments in real estate considering the recent demonetization. The Indian Government this year notified a new act called The Real Estate (Regulation and Development Act,2016). It is commonly known as RERA. This will now bring transparency in the developers and they will be accountable to the consumer through a law in force for timely delivery etc.
The Real Estate sector in India was one where maximum unaccounted money or cash was used. It is said that in any Estate deal 60% accounted money was used and remaining 40% was through cash, irrespective of the amount. Now for two years this proportion came down due to slow down in corrupt practices and vigilance of the current regime. Therefore, there is a massive availability of ready to move in Flats, Apartments, Pent Houses etc. and their price have come down to 50 %. Hence there is a negative Growth in real estate market in India. Total FDI in the construction sector, from April 2000-March 2016 stood at US$ 24.188 billion.
AFTER AFFECTS OF DEMONITIZATION
Demonetization was a well-planned decision in terms bringing the unaccounted into account. There was no stricto-senso policy for implementation of banking system in India while buying or selling a estate or any other unorganised sector, leaving a few real estate developers most were indulging in unaccounted practices of selling the estates without using the banking system. The biggest reason was that people had hoarded cash through illegal practices and the real estate market had become their parking lot. Demonetization has ceased this parking of unaccounted wealth practices.
HOW DOES INDIAN DIASPORA IN UNITED STATES BENEFIT?
Estate planning for NRIs or investments in real estate considering the recent demonetization.
It’s great to see that the United States economy has all legal and administrative measures to watch the income of their people. The IRS here is strict and therefore people fear that if they do not pay tax they will be in serious trouble. Therefore, all the income generated in United States through legitimate source is taxed. Now since there is an abundance of real estate availability in India in cities like Gurugram (Gurgaon), Noida, Mumbai, Pune, Bengaluru, Chennai etc. Looking at the 50% negative growth in the Real Estate market in India. It’s the perfect opportunity to invest the savings in real estate. Thanks to Demonetization.
AFFECTS OF DEMONITIZATION ON CURRENT INVESTMENTS BY NRI’s
It’s very important to note that any investment by a foreigner in any country is always compared with its prevailing currency exchange rates. US dollar is stronger than INR in the current scenario. In such circumstances it would be incumbent for the foreign investor to invest in real estate in India post Demonitization. Therefore Estate planning in India for NRI’s post demonetization is the right time for long term investment.
SENTIMENT POST DEMONITIZATION ;
The sentiment globally towards India globally post demonitization has been positive because the global market is looking India as a more organised economy and connected with the banking system. The current Indian Finance Minister as termed India heading towards a “New Normal”. This has also put a full stop on those who had been stashing away black money abroad because it was intented to evade taxes and this has been a matter deep concern to the nation. Therefore, for the last two years, the Indian Real Estate market was going through a crunch because of Indian Mr. Prime Minister’s revolution to tackle black money or undisclosed Income. Therefore, the Indian Parliament bought an act “The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. This broke the back bone of those who wanted to bring black money through unaccounted routes to India and Invest in Real Estate. Hence the fall in prices of real estate prices.
(Shekhar Raj Sharma shekhar@srslegal.org is The Author of this Article & is a practicing Lawyer at the Supreme Court of India & having an experience of Decade plus at the Bar. The views expressed here are personal.Mr. Sharma works closely with NPZ Law Group staff to assist clients on the ground in New Delhi with various India law issues.)