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Post Budget Reactions On Real Estate

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Rajendra Kumar Panpalia, Managing Director of Wave Group
In our pre-budget expectations, we were expecting the government to increase the cap of home loan interest deduction limit from Rs 1.5 lakh to Rs 3 lakh for first home buyers. The finance minister increased the limit to additional amount of up to Rs 1 lakh for new home loans of up to Rs 25 lakh, which will be taken from April 1st 2013 to 31 March 2014. This will lead to renewed interest by end users to invest in housing projects and would strengthen the cement and steel markets as well.

Finance minister also made announcements to provide Rs 6,000 crore and Rs 2,000 crore to rural housing fund and urban housing fund respectively; this is expected to mitigate some funding issues in the housing sector. Also continuation of existing exemptions from service tax for low cost housing is also a welcome move.

However, there were no announcements to grant an industry status to the real estate sector and no news on continuation of interest subvention of 1 per cent on home loans for affordable housing. We have to wait and see if there is any clarity on these issues.

Bhim Yadav, Chairman and Managing Director, Falcon Realty Services (P) Ltd
We welcome the Finance Minister’s decision to grant an additional tax deduction of interest of up to Rs.1 lakh for a person taking the home loan up to Rs.25 lakh for the first time during the financial year 2013-14. The move will help promoting the affordable sector and will also widen employment opportunities for many in the construction sector. This will boost the affordable housing and will be beneficial for the real estate sector.

Our Global Eco-city project which is located on NH-8 alongside the Delhi-Mumbai Industrial Corridor (DMIC) will see a surge in demand as the plans for seven new cities have been finalized and the project is also in a rapid progress.

Ravi Saund, COO, CHD Developers
The budget may have failed to live up to the expectations but one can’t shy away from the fact that this is a responsible budget. At this point, it is difficult to gauge whether this union budget would succeed in propelling the growth engine of the Indian economy to newer heights. However, couple of reforms announced is a welcome move. Prima facie it looks positive for the real estate sector at large.

Infrastructure has received a major thrust, especially transport and energy segment. The steps to increase funding for roads, highways and other infrastructure will surely add more terrain on the Indian realty map taking tier 2 and tier 3 cities on new growth trajectory.

Opening up of the ‘External Commercial Borrowing’ (ECB) window for affordable housing will ensure better capital availability for developers of low-cost housing and boost the overall sector which is characterized by low margins. The service tax exemption in low cost group housing will help the sector. Affordable housing segment has received the push in this budget yet lot needs to be done.

The government has encouraged the home buyers by giving additional deduction of interest of up to Rs 1 lakh in 2013-14 to the first time home buyers taking housing loan of up to Rs 25 lakh. There’s a scope of improvement in the interest subsidy to boost the housing sector.

The imposition of 1 per cent TDS on property worth more than Rs 50 lakh will not only control speculation, but will also bring about improved reporting and accountability in high-value housing transactions. The government’s move of injecting more money in the market by providing  stimulus of Rs. 6000 crore and Rs. 2000 crore to rural housing and urban housing respectively, will further support the growth of the sector by increasing the liquidity.
Boman R Irani, CMD, Rustomjee Group
On the whole the budget has been a mixed bag for the real estate sector. While the finance minister provided some cheer for first time home loan borrowers by increasing the exemption limit, the abetment of service tax coupled with higher excise duty on marbles were some of the key disappointments for the sector. Also, our long standing demand of granting industry status to sector was not met in the budget.

On the positive front, first time home loan borrowers will get an additional tax deduction of Rs 1 lakh for loans up to Rs. 25 lakh during the financial year 2013-14. This will take the exemption to Rs 2.5 lakhs from Rs 1.5 lakhs thereby giving a thrust to affordable housing.

However, the excise duty on marble has been doubled from Rs 30 per square meter to Rs 60 per square meter thereby having a negative impact, as developers will be forced to pass this to the buyers. Also, abetment of service tax has been reduced from 75% to 70% for homes costing Rs 1 crore or above and over 2000 square feet. This will lead to an increase in service tax outflow from 3.09% to 3.71% in the coming year thereby making luxury homes expensive. What also impacted sentiment was the increase in surcharge to 10 percent on domestic companies with annual income of more than Rs 10 crore.

We were also looking at key policy decisions which would make home buying a priority for everyone in the country. There were no reforms enabling the same as the budget gave very less impetus to “Homes for All” that is the need of the hour. Also, the Real Estate Regulatory bill which could have made the sector more transparent in terms of transactions and dealing was not implemented.

There has been no reduction in stamp duties on real estate transactions. The concerns of the industry, particularly on the interplay of GST and local levies are still not addressed. So things remain at status quo.

Several key issues like rising cost of raw material and elimination of service tax on housing should have been addressed in this Budget. We were also expecting the income-tax exemption limit on loans to be raised, but that has not happened.