The Union Budget announced last week has attracted attention from industry experts. Some reactions on its bearing on the real estate industry
Continued support
In comparison to the previous Budget, the 2013-14 Union Budget continued its support for the housing sector. The allocation of Rs. 2,000 crore for urban housing renders affordable low-cost housing a key highlight. However, the one per cent TDS on property transactions above Rs. 50 lakh will stretch the end-users’ budgets as well as impact the developers negatively. Funding continues to be a challenge for developers and no industry status for the real estate sector.
Due importance to infrastructural development and continued support to the JNNURM scheme in the 12th Five Year Plan will positively impact the real estate sector.
Shrinivas Rao, CEO-Asia Pacific, Vestian Global
Positive one
The two biggest positives of the budget are that (a) concerns on fiscal deficit have been squarely addressed by limiting it to 5.2 per cent in FY13 and to 4.8 per cent next year, and (b) resisting the pressures of an oncoming election to announcing any freebies that could skew government finances.
Concerns on fiscal deficit that remain are (a) that reduction in FY14 assumes an increase in growth rate of GDP that is not manifest; (b) proportion of revenue deficit remains high.
R. Raghuttama Rao, MD, ICRA Management Consulting Services
Blow to luxury housing
The Finance Minister has resorted to taxing the rich by decreasing the service tax abatement by five per cent. This will result in pushing up the capital values of under-construction residential property and affect high-end and luxury markets in the major cities. The move to introduce TDS for real estate transactions is aimed at ensuring that taxes are collected and some transparency is brought into the sector. Whilst this is a laudable initiative and helps the government in its revenues, it will not ensure complete transparency as some unscrupulous sellers may still insist on undervaluing their property in legal documents in order to avoid or reduce the quantum of tax they are liable to pay. Sanjay Dutt, Cushman &Wakefield
Beneficial largely
A realistic and balanced budget for the most part because of the promise shown by the Finance Minister to grow domestic and foreign investment, and development of commercial corridors between cities like Bangalore, Chennai, Mumbai and Delhi. The budget did not meet the hype created around development of real estate. On a positive note, buyers will now benefit with the increase of slab for first-home purchase of up to Rs. 25 lakh, thereby being entitled to an additional deduction of interest of up to Rs 1 lakh. This will increase home ownership as well as all associated industries. This increase in slab is a huge relief for a lot of customers but still not enough for mega cities like Mumbai and Delhi.
Pravin Malkani, MD, Patel Realty
Two clear signals
For the real estate industry, two signals emerged: the government will single out housing from overall real estate, and in terms of providing incentives, it will focus on the beneficiary i.e. the consumer rather than the producer. The only meaningful incentive for this industry i.e. the additional interest deduction of Rs.1 lakh on housing loans up to Rs.25 lakh is a testimony to this intention. The affordable housing segment will get a definite boost as a consequence and certainly this segment required such a stimulus to increase the housing stock and bridge the gap. The introduction of one per cent TDS on sale of immovable property exceeding Rs. 50 lakh was avoidable. The budget gives an impetus to development of seven new cities along the industrial corridors, of which two will see work commencing soon.
Pranab Datta, Chairman, Knight Frank India
Real Estate is one of the few investments where you have some control over the value.
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