Pradhan Mantri Awas Yojana: How India can realize its dream of Housing for everyone by 2022 ?

by Sunil Kumar Gupta | May 6, 2019 | blog

What is Pradhan Mantri Awas Yojana and how it is going to change the face of the nation?

If you notice, even with such a big nation like India, in the last 60-70 years not everyone has a house of their own. We’ve also been noticing from the past few years that every person wants to have his/her own house. However, it’s only after they spend time between the ages of 25-40 working a job or a business that they manage to think about buying their own house.

Today, the statistics of the country show that about 40-45% population of our country is earning a monthly income of about ₹10,000 – 25,000. So someone with a gain of 10,000 – 25,000 cannot even think about buying their own house and those who have a higher income even if they buy a house, it takes them 20-25 years to make their house, so they cannot actually enjoy living in their property in their prime years.

So how do we solve that? How do we make sure that every citizen in the country has their own property? Considering that vision, our esteemed prime minister – I always say he has a really good vision, made a unique plan. The statistics of our country say that the requirement of a house is 96% for LIG & EWS which means smaller affordable housing. But in our country, whether it was a government agency or private builders, they would try to earn super-normal profits, and to do that they kept making such properties suitable for the super-rich, who could buy them for their investments. The person who had 1 house s/he bought 2 more, 3 more, and then sold them at a higher price. This way the person continued doing his/her business but the common man who earned about Rs 25,000 – 40,000 was left out and just kept wondering if they’d ever be able to afford a house of their own or not. So to fulfill that, this Yojna was made which made affordable housing possible.

So the government announced that by 2022, they aim at making about 3 crore properties in the countryside (Gramin Shetra) and 2 crore houses in the cities. They wanted to make a total of 5 crore houses due to which every person, every household i.e., a person and his/her family should at least have a house of their own. That is why this Yojna was brought into action.

About the Author

Sunil Kumar Gupta is an entrepreneur par excellence, philanthropist, and a great visionary. He is the Leader of Indo European Business Forum (IEBF) and also the Founder Chairman of SARC & Associates, Chartered Accountants, and SARC Foundation, and Life Trustee of Rashtriya Antyodaya Sangh, a Public Charitable Trust. He has over 32 years of experience in diverse fields such as Corporate planning, Financing, Taxation, Banking, Education, Investments, Oil & Gas, and project implementations. He is a Fellow Member of the Institute of Chartered Accountants of India (ICAI), a Life Member of the Indian Council of Arbitration, and a Full Member of the Institute of Certified Public Accountants of Uganda (CPA-U).

Due to his business acumen, and analytical & policy-making skills, Mr. Gupta has been a part of several international delegations. He accompanied the Former Hon’ble President of India Mrs. Pratibha Devi Singh Patil in the business delegation to Seychelles and South Africa, to discuss bilateral issues between the two nations. He was also a part of the 21-member delegation from the Institute of Chartered Accountants of India to Vienna, Austria in 2011.

Mr. Gupta is associated with various Government Authorities, as a Consultant for Income Tax and GST matters, like Northern Railways (NR), Delhi Development Authority, DGH (Ministry of Petroleum and Natural Gas, Govt. of India), New Okhla Industrial Development Authority (NOIDA), Greater Noida Industrial Development Authority (GNIDA), Yamuna Expressway Industrial Development Authority (YEIDA).

How REIT will be a game changer for Indian Real Estate Industry

by Sunil Kumar Gupta | May 6, 2019 | blog

The concept of REIT which is an acronym for Real Estate Investment Trust has been there for nearly 60 years now REITs. REITs as an investment asset class came into being when President Eisenhower of the USA enacted a law in 1960 that enabled all investors to invest in diversified large-scale portfolios of real estate that produce income in form of rent and lease. The first REIT was launched in 1961 by American Realty Trust 1961. In 2018, globally REITs had over 2 trillion US Dollars worth of assets under management. In the budget of 2014, Finance Minister Arun Jaitley introduced a law for setting up REITs and in August 2014 India approved the creation of Real Estate investment trusts. Last month, Blackstone Group LP – Sponsored, Embassy Office Parks raised Rs 4750 cr through India’s first REIT IPO. The IPO was over-subscribed 2.58 times. Investors in this REIT IPO were allotted units at a price of Rs 300. On its listing day, the REIT IPO received a thumbs up from the market when it touched a daily high of Rs 325 and closed at Rs 314, thus enabling IPO investors to earn a sizeable gain of 4.7% on the issue price. With it India became another market having REIT offerings for individual investors.

• Reduced Risk, Stable Returns, and Diversification for Investors in Real Estate  (REIT)

A new fund-raising avenue for the cash-strapped real estate sector in the country. Firstly it gives investors an investible corpus of only a few lacs to invest instead of conventional Real Estate where you were set back by a huge amount. Secondly, it also gives investors exposure to a pool of real estate thus giving them much-needed diversification across properties and geographies. This reduces risk as end users are holders of units of securitized real estate pools.  According to the guidelines, REITs will have to invest in a minimum of two projects with 60% asset value in a single project. REIT will showcase the full valuation on a yearly basis and will also update it on a half-yearly basis. Thirdly it is managed by a professional investment team so investment risk is further reduced. Last but not least is a friendly taxation structure. if a REIT unit will be by the investor for a period of more than 3 years then the long-term capital gain will be applicable. If the periodic income is through dividends then it is tax-free and if the pay-out is in the form of interest then tax will be applicable as per the tax slab of the unit holder. For Indians, Real Estate has always been a preferred investment class as according to an RBI study about 56 percent of Indian household savings have been concentrated in Real Estate but Indians have long invested largely in Residential Real Estate which has lower rentals. Retail investors have stayed away from commercial real estate because of the higher ticket size of investment and the complexity associated with commercial property ownership. Colliers Research shows that the Indian market is rife with great opportunities in terms of rental yields as evident from the infographic shown below.

The launch of the first REIT will certainly be a game changer for Real Estate as it has the potential to revive the commercial real estate segment by introducing Retail investors to contribute sizeable inflows across this segment.

• Needed Liquidity Boost for  Real Estate Industry (REIT)

The greatest benefit for the Real Estate industry as a whole will be that of fast and easy liquidation of investments in the real estate market, unlike the traditional way of disposing of real estate which is very opaque and fraught with risks of fraud, cheating, and legal disputes emanating from property records. The assets under REIT corpus are rent-bearing assets where an established name has gone through due diligence from multiple bodies including SEBI, so property records will be transparent and it will boost Real Estate industry sentiment. India’s real estate has endured a lot in recent years. Despite the high credit growth environment and factors like Demonetisation, Global Recession, and rapidly evolving GST structure, Real estate has held forth as a preferred asset class for Indians. This is a much-welcomed move and will give the real estate industry a much-needed boost. Given the prevalent situation of funding crunch, the launch of the first REIT offering in India is very well-timed for real estate developers who want to unlock much-needed capital to fund further projects or to pare down their debt. It will also greatly reduce a great deal of pressure on the NPA-saddled banking industry. It will ensure more liquidity for Banks to lend to end users and customers instead of relying on a much riskier way of lending through Loan Against Property (LAP) and Lease Renting Discounting (LRD).

About the Author

Sunil Kumar Gupta is an entrepreneur par excellence, philanthropist, and a great visionary. He is the Leader of Indo European Business Forum (IEBF) and also the Founder Chairman of SARC & Associates, Chartered Accountants, and SARC Foundation, and Life Trustee of Rashtriya Antyodaya Sangh, a Public Charitable Trust. He has over 32 years of experience in diverse fields such as Corporate planning, Financing, Taxation, Banking, Education, Investments, Oil & Gas, and project implementations. He is a Fellow Member of the Institute of Chartered Accountants of India (ICAI), a Life Member of the Indian Council of Arbitration, and a Full Member of the Institute of Certified Public Accountants of Uganda (CPA-U).