March 10, 2017
There’s an old saying amongst bankers: there aren’t any fleas on a dead dog, and even for those who take a less than charitable view of State Taxes, there is surely no better sign of a strengthening in the Indian Property Market than its local tax yield. But don’t let’s look at the usual culprits to test that thesis, because we all know about Mumbai and Delhi already; take a look further south instead at Telangana, newly constituted as a State as recently as 2014 and still taking its first steps as the twelfth largest state on the subcontinent. Its reported yields from property and building transactions suggests strongly that the real estate market both there and across India generally is getting stronger still.
Because, in India, the dog isn’t even poorly, never mind dead.
Telangana this week reported a record growth in net revenue from stamps and registration fees on new property transactions: up by a whopping 32.1% at Rs 1.935.3 Crore. It’s a report that any CFO or a major public company would be proud of.
And according to the Chief Minister’s Office of Telangana, it’s all down to an increased ease of doing business in the real estate sector; the spin offs from major new infrastructure projects in the State, including substantial infrastructure and power projects which inevitably act as a honey pot for new investment and the core catalyst of single window clearances.
Single window clearances can, of course, have a uniquely destructive effect on trade. We might remember the single window clearance point operated by the French State in Poitiers in the 1980’s which required the Japanese company JVC to export all of its video machines through a single customs post which was (deliberately) configured to make it virtually impossible to secure anything like a normal import throughput; one French customs officer with a manual rubber stamp and a flip chart saw to that, which was why the procedure was rightly seen for what it was: a restraint on trade rather than a legitimate protection against illicit imports.
But that’s all changed now, and India is reaping the benefits.
Nowadays, single window clearance is synonymous with increased efficiency through time and cost savings for traders in their dealings with governmental authorities. The relevant clearances and permits for a property transaction can now be obtained through a single agency which streamlines what can otherwise be a frustrating multi-agency process.
And from the recent statistics coming out of Telangana, it’s obviously working. It has all led to what has been described as a “hectic growth” in the real estate sector.
Telangana has now set a full year target for stamps and registration fee yield at Rs 4,291.99 Crore and, to their great credit, 45% of this full year target had already been achieved by September of this year. In all, Telangana reported 5.76 lakh transactions of land and building transactions during the first six months of the current fiscal year; and with a resulting air which is perhaps becoming for such a young State, its CMO has predicted that where Telangana leads, others will follow.
As recently as the end of last month (September 2016) Wang Jialin, China’s richest man and leading property magnate, warned that through a combination of an unseemly rate of credit expansion, government spending rates and internal “strictures”, the Chinese Property market was facing the “biggest bubble in history”.
India has none of that baggage and can show the way forward for how a properly modulated property market can thrive.
Because, after all, there aren’t any fleas on a dead dog.