Real(ty) issues ignored?

However,the real estate sector would have been more contended to have got government’s notice towards the huge gap in demand and supply of mid market segment housing. “While the sector saw effort from the government towards low cost housing,meeting up with more urgent requirements towards removing archaic laws and bringing taxation to a reasonable level would have further brought good news for both the industry and the large mid-market segment of the country,” says Banerjee.

AFFORDABLE FOCUS

There was attention given to the low cost housing sector in this year’s budget. “The subvention of 1 per cent interest rate on housing loans up to Rs 15 lakh,where the cost of house does not exceed Rs 25 lakh,is a welcome measure. The proposal to enhance the existing housing loan limit from Rs 20 lakh to Rs 25 lakh for priority sector lending and a mortgage risk guaranteeing fund for LIG housing loans is also a positive move by the government,” says Anshuman Magazine,chairman and managing director at CBRE,South Asia. “The Mortgage Risk Guarantee fund will improve credit worthiness of the economically weaker section (EWS) for accessing housing loan. Further,enhancing the rural housing fund from existing Rs 2,000 crore to Rs 3000 crore will benefit the rural housing sector,” he says.

On increase in priority home loan limit,Pradeep Jain,chairman of Parsvnath Developers,says,“This will certainly help the LIG buyers who plan to buy a home through bank loans. As in the last budget,it was directed that every bank has to maintain 20 per cent of its loans to this priority section,this is definitely a boost for the sector as it will increase demand.” Jain says the interest subvention of 1 per cent will increase demand. “Interest subvention is basically an interest subsidy given by the government on loans. This is definitely a giant leap so as to boost the demand for affordable housing. Also,allocation of Rs 58,000 crore to Bharat Nirman projects and proposal to set up Mortage Risk Guarantee fund for rural housing is a very good move towards rural development.”

Business Development head at CHD Developers,Ravi Saund,says the Budget is positive for the housing sector as a whole,even though “the focus is clearly on affordable and rural segment”. He expects the subvention of 1 per cent interest rate to drive real estate development in smaller towns. “This will have a positive impact in tier 2 and tier 3 cities as well as cities abutting metros,” says Saund.,Unitech managing director Sanjay Chandra feels the government’s moves will aid in boosting demand and development of affordable housing in coming months. “Our recent launches of Unihomes in Rewari,Mohali,Chennai,Noida and Bhopal has met with an encouraging response from genuine buyers. With the new measures announced in the budget,we believe that the pace of demand will be robust and we are well poised to respond to this demand.”

“By enabling and enhancing credit worthiness of EWS and LIG households,the finance minister has proposed to create a Mortgage Risk Guarantee Fund under Rajiv Awas Yojana. This far reaching policy shall encourage housing finance institutions for lending to these sections and will cover the risk element of a possible default in loan repayment. Availability of loans shall give a push to development of LIG housing and it is expected that housing development companies shall be encouraged to construct more houses in this segment,” says Sunil Dahiya,managing director of Vigneshwara Developers. “By increasing the audience of the real estate industry,growth shall be more on the doctrine of ‘increase customer base to get more revenue’ than,seek fiscal relaxation in budget ‘to optimise current shrunk revenue base’,” he says.

PROBLEM AREAS

While most term it as a growth-oriented and inclusive Budget,developers and analysts are not happy that Minimum Alternate Tax (MAT) on SEZ developers has been advanced by a year. “While it was to be implemented under Direct Tax Code from April 1,2012,the advancement of this tax by one year will be a dampener for developers of SEZ. This will increase the skepticism in the minds of SEZ developers about the future tax benefits of developing an SEZ,” Pranab Datta,managing director of property consultant Knight Frank India. “Despite being a positive budget,from a real estate perspective,the urban middle-income housing consumers who have been reeling under the pressure of spiraling prices seems to have been left out of any meaningful benefit,” he says.

Navin Raheja,chairman of Raheja Developers feels the Budget “fails to meet the expectations of real estate and SEZ developers. Also,the imposition of service tax on hospitals and hotels will add cost to basic necessities. The finance minister has not considered any of the demands of reality sector.” Wave City executive director R K Jain says,“Nothing was said on reduction of stamp duty and making it uniform across all states. Also,nothing was said regarding the concession if stamp duty has already been paid on one transaction. These things are responsible for increase in property rates.

We can only hope that in future government will pay heed to these demands and needs of the real estate sector.”

Paras Buildtech vice-president (sales and marketing),Harmit Chawla,goes so far as to say that the Budget,despite focusing on affordable housing,is a mere eyewash.”The 1 per cent sop on apartments up to Rs 25 lakh is just a cosmetic move for ‘A’ grade markets. The Budget is heartbreaking for real estate developers. No incentives for affordable housing,no mention of FDI (foreign direct investment) and no tax exemptions. We have to wait once again for the boost that the sector needs”

Developers are also peeved that there was no mention of income tax for the sector. Parsvnath’s Jain says,“There is nothing on 80-IA (relating to housing) and 80-IB (relating to IT parks) of the Income Tax Act,which was expected. Also,30-36 per cent of total value of a flat comprise of tax. About MAT in SEZs,the government should not deflect from declared policy of tax exemptions,which gives wrong signal to investors in such projects.” CBRE’s Magazine says,“Imposition of service tax on hospitals and hotels should have been avoided. Overall it was a reformist budget,however it did not take expected bold decisions like allowing FDI in retail which would have had a significant impact on our economic growth.”

While the finance minister appears to have done a fine balancing act under trying circumstances,managing fiscal deficit while keeping an eye on growth,in the end developers feel the Budget falls short of ushering in big ticket reforms. Industry body Credai’s vice president Getamber Anand says,“For a start,we would have welcomed industry status for the real estate segment which is directly linked to growth. The complex tax structure in our sector has not been addressed. While tax incentives for affordable housing has been touched upon,we would have to wait for the finer print to emerge. On the input side,we understand there is a duty cut in cement and steel prices but other related issues should have been dealt with to positively impact the common man at the end of the day. It remains to be seen how the income tax exemption on affordable housing will impact the industry in the long run.”