JLL India’s Research team is releasing a whitepaper on the first year of Modi government. A survey of the Indian real estate community, done as part of the research, reveals nine impressions, or misimpressions, of this government that exists in the minds of Indian realty’s stakeholders. We also provide our own views on each of these:
1. Much has been said, but little has been delivered
JLL’s view: Modi has taken several initiatives, the outcomes of which will be seen only in the medium-to-long term (i.e. 2-3 years). Initiatives such as developing affordable residential projects, robust infrastructure, financial inclusion of the LIG segment into the banking sector, etc., are important initiatives but require time to fructify. Critical evaluation of success at this stage may be premature.
2. Power is too concentrated
JLL’s view: This fear loomed large in the minds of several political and market analysts since the time Modi came to power. The highly centralised appearance of the government has moderated in recent times with decentralisation of power to cabinet members and states’ chief ministers. We agree that power should be further de-centralized to the grassroots level (i.e. district and panchayat level authorities) and this further downward percolation of power may take another year or two.
3. Land Acquisition and Rehabilitation and Resettlement Bill not progressing as expected
JLL’s view: There has not been much progress on the bill since the time it was first approved by the previous Congress government, and even after the recent amendments made in the Bill by the Modi government. Modi’s grand vision to build superior infrastructure, affordable housing projects and smart cities is related to the success of this Bill, which could be cleared by the Parliament after recommendations by the Joint Committee of Parliament come through in the monsoon session.
4. Clarity needed on ‘Housing for all by 2022’ scheme
JLL’s view: After having announced the scheme during the first Budget in June 2014, the government has remained silent on details. The market expected fine prints to come by in subsequent communications. The task of constructing 2.34 million homes every year as against an actual delivery of 1.2 million homes during the 11th five-year plan period (ending March 2012) is humungous. As of now, matters definitely do not look upbeat on this front, and the doubts being expressed are justified.
5. Smart Cities Mission cleared by the Cabinet but clarity needed
JLL’s view: As the definition of smart cities given in the note released by Ministry of Urban Development is too broad, different agencies have had different interpretation of the concept. Even though the union cabinet has cleared the Smart Cities Mission and allocated Rs 48,000 crore, there is a lack of clarity on identification criteria for the qualifying cities.
6. The Real Estate (Regulation and Development) Bill still pending
JLL’s view: Construction delays in many real estate projects are the result of delay in granting statutory approvals. Cost of financing material costs rise exponentially as a result of such delays, and this has an adverse impact on housing prices. The Bill – that the government is currently considering sending to a select committee for review – does not cover the actions of approval authorities and largely attempts to curb malpractices at the developers’ end. We feel that the Modi government could have done more on this front.
7. E-commerce needs to be regulated
JLL’s view: E-commerce has taken the Indian retail market by storm, and has been growing at close to 35% y-o-y in the last few years. Stiff competition among e-commerce players has resulted in price wars that had impacted the margins of physical retailers. There is a need to regulate the online retail space and bring them on level playing field along with physical retailers. As of now, we see no evidence of efforts being made in this direction.
8. Anti-corruption needs to be a focus area
JLL’s view: The promise of bringing the Lokpal bill immediately had given Modi a marginal edge over the AAP party – the champions of the anti-corruption brigade – during the elections of May 2014. However, subsequent lack of progress or even convincing talk in that direction has been giving an impression that the issue is a low priority one for the Modi government. If not for this apathy, Modi would have performed better in the recently concluded Delhi elections.
9. Tax structures are complex and retrospective tax amendments continue to haunt businesses
JLL’s view: While the Modi government had expressed its strong intention of doing away with retrospective amendments, the issue still remains unresolved. Also, while simplification of tax structures has been spoken about, this will take some time to implement. If these tax issues are addressed properly, India would move forward in terms of improvement in World Bank’s ‘Doing Business’ rankings.
Authored by Anuj Puri, Chairman and Country Head at JLL India
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