The real estate sector has had a mixed reaction to the Union budget and while there is a general consensus that being a growth-oriented budget, there are attendant benefits for the sector, they feel some issues could have been addressed.
The positive revision in personal income-tax rates will put more money in the pockets of the middle-class, thereby increasing the buying power and sentiments of home buyers. Coupled with the extension of the one per cent interest subvention for affordable housing, this clearly is a sign that the residential sector will continue to thrive.
“We would have been even more grateful for the re-introduction of the Sec. 80IB (10) tax benefit scheme, first implemented in 2001, which is definitely a boost for developers of affordable housing. Nevertheless, the fact that existing incentives continue to be in place is positive,'' said Anuj Puri, Chairman and Country head of property consultancy, Jones Lang LaSalle Meghraj. He felt that it was a positive, growth-oriented budget and growth in the economy always equalled growth for the real estate sector. “Because of the overall economic growth implied in their enablement by this budget, we have no overt complaints on behalf of real estate.''
Kumar Gera, Chairman, Confederation of Real Estate Developers' Associations of India (CREDAI), and Chairman, Gera Developments, said for the real estate sector, the budget was “a kind of status quo. There is a good side and bad side. The good is that ongoing projects that suffered due to meltdown and liquidity crunch have a one year extension. The government has continued with interest subvention for loans up to Rs.10 lakh and that is good for the marginal buyer. The thrust on infrastructure too will have a direct bearing on a lot of areas including real estate.''
Ravi Puravankara, Chairman, Puravankara Group, said the reduction in the income-tax rate up to Rs.8 lakh was positive. “A saving of up to Rs.50,000 to a person having salary up to Rs.8 lakh is a great saving and will increase the purchasing power. The extension of time to complete the Sec. 80IB projects from four years to five years is also a good move in the light of the delay caused due to the recession. With substantial focus on rural economy, Tier- II and Tier- III cities will have better growth and will throw up greater opportunities.''
However, Mr. Gera said there was a worry about the indication that the sale of apartments would be considered as a service. “The method of computing will be a huge problem. One cannot pay service tax on the value of land, labour, service and material and this could give rise to litigation and how will the stamp duty be paid.''
In the present recessionary trends, extension of the interest subvention scheme for home loans by one more year is a welcoming step by Finance Minister and this will be a booster to affordable housing.
Home buyers will get one per cent interest subsidy for bank housing loans up to Rs.12 lakh provided the cost of house does not exceed Rs.20 lakh, according to Shriram Properties Managing Director M. Murali.
Mr. Puri however, felt that the increase in allocation for slum redevelopment to Rs.1,270 crore will ensure that key areas in city centres will begin to yield quality real estate supply. “This is of critical importance when it comes to giving form and logic to the urban landscape in congested cities like Mumbai.'' The Rs.200-crore allotment for the restoration of Goa's beaches will do much to bulwark this State's tourism industry, which was flagging under the onslaught of considerable negative publicity in recent times, felt Mr. Puri.
“While the renewed focus on infrastructure is definitely positive, what was conspicuous by its absence was the formal inclusion of townships under the infrastructure umbrella. In areas where infrastructural enablement is a challenge, townships are a boon because they bring their own infrastructure along with them," he said.