The Impact of Government Policies on Mumbai’s Real Estate Market
Mumbai is a hub of real estate activity. The city’s real estate market is heavily influenced by various government policies, and the past few years have seen some significant changes in this regard. In this blog post, we will examine the impact of recent government policies of RERA and GST on the real estate market in Mumbai, and how they are affecting buyers, sellers, and developers.
The Real Estate (Regulation and Development) Act, 2016 (RERA) was implemented in May 2017 to bring transparency and accountability to the real estate sector. The act requires developers to register their projects with the regulatory authority, provide timely updates to buyers, and maintain a separate escrow account for each project. The act also imposes penalties on developers for delays in project completion and provides a grievance redressal mechanism for buyers.
The impact of RERA on the Mumbai real estate market has been mixed. On the one hand, it has brought transparency and accountability to the sector, which has increased buyers’ confidence in the market. On the other hand, developers have had to incur additional costs to comply with the act’s provisions, which has increased project costs. According to a report, Mumbai accounted for 25% of the total RERA registrations in the country. As of March 2022, over 27,000 projects and 25,000 real estate agents were registered under RERA in Maharashtra.
The Goods and Services Tax (GST) was implemented in July 2017 to replace multiple indirect taxes with a single tax. The tax is levied on the value-added at each stage of the supply chain, and the input tax credit mechanism ensures that businesses can claim credit for taxes paid on inputs. The real estate sector was brought under the GST ambit in April 2019, with a 5% tax rate for residential properties and an 18% tax rate for commercial properties.
The impact of GST on the Mumbai real estate market has been significant. According to a report by Knight Frank India, the implementation of GST and RERA resulted in a 50% reduction in new launches in Mumbai in the second half of 2017. However, the market gradually recovered, and new launches increased by 51% in the first half of 2019. The report also notes that the introduction of GST has led to a reduction in the number of cash transactions in the real estate sector, which has increased transparency and accountability.
The impact of these policies on buyers, sellers, and developers has been significant. Buyers have benefited from increased transparency and accountability, which has increased their confidence in the market. However, the increased project costs due to RERA compliance have resulted in higher property prices, which has made it challenging for some buyers to afford properties in Mumbai. Sellers have also had to adjust to the new regulatory environment, which has resulted in delays in project launches and increased costs. Developers, on the other hand, have had to incur additional costs to comply with RERA provisions, which has resulted in increased project costs.
In conclusion, the implementation of RERA and GST has had a significant impact on the Mumbai real estate market. While these policies have brought transparency and accountability to the sector, they have also resulted in increased costs and delays in project launches. However, the long-term benefits of these policies are likely to outweigh the short-term challenges, and they will undoubtedly continue to shape the Mumbai real estate market in the years to come.