Commercial Real Estate Effects of Government Policies Since its inception, commercial real estate has been a highly sought-after asset. However, in light of the current state of the economy, it is more crucial than ever for investors to comprehend the role that the government plays in the commercial real estate market. Government policies can have a significant impact on real estate prices in India.
The introduction of new laws, modifications to taxation, investment incentives, and infrastructure projects, in particular, may have an impact on the national cost of buying and selling real estate. The Indian real estate market showed resilience in the face of global economic uncertainty in Q3 2023, displaying fresh signs of recovery. The preferences of purchasers have changed, with a greater emphasis placed on affordability and connection. According to a report published by Mordor Intelligence, the Indian real estate industry is anticipated to expand at a CAGR of 25.60% between the years 2023 and 2028, rising from an estimated USD 265.18 billion in 2023 to USD 828.75 billion by 2028. Government Measures for Long-Term Growth During the third quarter of 2023, government policies had a significant impact on the real estate landscape. In accordance with the commitment to establishing a favorable environment for the real estate industry, initiatives were launched with the objectives of streamlining approval procedures, providing tax incentives, and encouraging sustainable development. The commercial real estate industry is significantly impacted by these interventions. Real Estate Regulatory Authority (RERA): The government’s efforts to streamline procedures and promote sustainable practices are a step in the right direction toward long-term stability and growth. The Real Estate (Regulation and Development) Act, more commonly referred to as RERA, is at the forefront of regulatory changes affecting commercial real estate in India. RERA, which went into effect in 2016, aims to boost efficiency, accountability, and transparency in the commercial real estate industry. RERA ensures that developers register their projects, adhere to deadlines, and maintain high construction quality. 2. Tax on goods and services The government’s landmark Goods and Services Tax (GST) implementation in 2017 had a significant impact on numerous industries, including commercial real estate. Processes were simplified and tax-related bottlenecks were reduced when a complicated tax structure was replaced by GST. The commercial real estate market in India has been completely transformed by the introduction of GST. The GST’s cost-cutting measures, increased transparency, and simplification of the tax code have all made it possible to create a market that is more efficient, competitive, and long-lasting. 3. Smart City Projects The Indian government’s ambitious Smart Cities Mission has had a significant impact on the commercial real estate market. This government initiative, which aims to create cities with a high standard of living, sustainable environments, and intelligent infrastructure, has led to the expansion of commercial hubs and business districts. 4. Policies for Foreign Direct Investment (FDI) The amount of capital entering the commercial real estate industry is directly impacted by the government’s policies regarding foreign direct investment (FDI). The government’s gradual liberalization of FDI regulations over time has made it possible for more foreign investors to get involved in the real estate market. In addition to attracting international investors, the loosening of FDI regulations has made it easier for domestic and international players to form joint ventures and work together.
