SEARCH

It is a mixed bag for real estate

K. Sukumaran
print   ·   T  T  

This year's Union Budget encourages low-cost affordable housing, but high-end buyers may have to shell out more, says K. Sukumaran

Growth oriented:This is a fillip to low cost housing. A view of the G+3 houses constructed for the poor under JNNURM.
Growth oriented:This is a fillip to low cost housing. A view of the G+3 houses constructed for the poor under JNNURM.

Many epithets have been used to describe the proposals contained in the Union Budget presented by the Finance Minister, Pranab Mukherjee, such as “growth oriented”, “pragmatic”, “recognises reality,” “disappointing” etc.

While the entire budget needs to be seen in the backdrop of high inflation, low industrial growth and the continuing global economic slowdown, let us look into the major proposals relating to the real estate sector, which contributes substantially to the Gross Domestic Product.

Direct proposals

Continuation of one per cent interest subvention to the affordable housing segment loans up to Rs. 15 lakh, where the cost of the house is not exceeding Rs. 25 lakh, for one more year.

This is a fillip to low cost housing, mostly benefitting the ‘aam admi.'

Enhancement of the Rural Housing Fund from Rs. 3,000 crore to Rs. 4,000 crore, to assist rural housing which faces a huge gap.

Provision for External Commercial Borrowing (ECB) for low-cost affordable housing projects intended to find resources for this segment.

Setting up of a Credit Guarantee Trust Fund to ensure accelerated flow of institutional credit.

Wider coverage under Viability Gap Fund (VGP) to encourage Public-Private Partnership (PPP) to increase investment in infrastructure including construction of storage facilities.

Enlargement of the Infrastructure Debt Fund, which was originally set up with an initial size of Rs. 8,000 crore and tax-free bonds of Rs. 3,000 crore during 2011-12 by raising it to Rs. 60,000 crore during 2012-13, which will be shared by NHAI (Rs. 10,000crore), IRFC (Rs. 10,000 crore), IIFCL (Rs. 10,000 crore), HUDCO (Rs. 5,000crore), NHB (Rs. 5,000 crore), Ports (Rs. 5,000 crore), SIDBI (Rs. 5,000crore) and power sector (Rs. 10,000 crore).

Enhancement of the Rural Infrastructure Development Fund (RIDF) to Rs. 20,000 crore, out of which Rs. 5,000 crore will be earmarked exclusively for creating warehousing facilities.

TDS (Tax Deduction at Source) of one per cent on transfer of immovable property above a threshold limit of Rs. 50 lakh in urban areas and Rs. 20 lakh elsewhere, which is likely to jack up the primary cost of property to the buyer.

Enhancement in service tax from 10 to 12 per cent on contract constructions, which will raise the property prices.

Infrastructure

The National Highway Development programme during the financial year 2013 is proposed to cover an extent of 8,800 km.

Exemption of import duty on specified equipment for road construction work by contractors of the Ministry of Road Transport and Highways, NHAI and State Governments is extended to contracts awarded by metropolitan development authorities.

This is a step to support the infrastructure programme in metros.

Indirect proposals

Reduction in excise duty on steel from 7.5 to 2.5 per cent can lead to reduction in the production cost of certain items of steel, including those used in construction work.

Application of excise duty on coal after abetment of 30 per cent as proposed, will help cement industry gaining around Rs. 1 per bag of 50 kg, which can be passed on to the consumer.

Investment-linked deduction of capital expenditure for affordable housing projects at 150 per cent as against the existing 100 per cent, can encourage such projects.

One good news for the apartment owners, though marginal, is the higher exemption limit for monthly charges payable for maintenance from Rs. 3,000 to Rs. 5,000.

Higher tax exemption limit of Rs 2 lakh (from existing Rs. 1.8 lakh) is a direct relief.

Exemption of Rs. 10,000 interest on savings bank can find more cash with the depositors.

Summary

The main accent in the budget is on low-cost affordable housing, basically meant for the ‘aam admi.' For the other investors, the budget can at best be considered a mixed bag.

Substantial growth of the sector may not become a reality.


O
P
E
N

close

Recent Article in PROPERTY PLUS

Let’s be water sensitive

For too long have we ignored water bodies in a city’s life.By S. Vishwanath »