Budget fails to impress real estate players
The Real Estate sector which had high expectations from the Finance Minister didn’t find the budget ‘very exciting’ for them. Though it has some positives for the sector, the budget remained silent on many of the demands. “It would seem that the Union Budget 2011 pointedly ignored the larger issues affecting the Indian real estate sector at this sensitive stage of revival and growth,” said Anuj Puri, Chairman & Country Head, Jones Lang LaSalle India.
He said that the budget remained silent on the pressing issue of extension of the STPI exemptions as well and Sec 80IA and 80IB, which are pertinent to the construction of residential projects of units sizes below 1200 sq. ft. “This is a de-motivating factor which will further curtail the supply of affordable housing,” he added.
According to him, SEZs that have been brought under the purview of MAT will basically diminishes the benefits that SEZs offer for developers over other commercial real estate asset classes.
Jitendra Jain of MD & CEO, Neev Group of Companies said that the budget is disappointing as the real estate sector was not given industry status. “Had the government given it an industry status, bank financing would have been easier for real estate companies. Affordable housing should have got some fiscal incentives as this would address affordability issues,” added Jain.
One of the positive things of the budget is the 1% interest subvention for home loans upto Rs15 lakh from the previous limit of Rs10 lakh which will come as a relief to home loan borrowers from the LIG segment.
"The move to increase the priority housing loan limit to Rs25 lakh was a positive one that will lead to increasing the base of home loan takers and thereby a boost for affordable housing,” Jain added.
According to Puri, raising the priority home loan limit from Rs20-25 lakh is good news for the LIG segment, but this will do nothing to ease the pain in the metropolitan cities where real estate prices and therefore demand for affordable housing is highest. “Companies such as Unitech and Ansals, which are rolling out budget housing, will be benefited by increase of volumes,” he added.
Ramesh Sanghvi, Director, Sanghvi Group, added: “The budget of 2011-12 has certainly given due importance to the affordable sector. The current scheme of interest subvention on 1% on housing loans is now extended to Rs15 lakh where the cost should not exceed Rs25 lakh”.
Puri said that allowing FDI in mutual funds would have been a blessing if the Government had been more proactive in allowing REMFs.
He said that industry is feeling very disappointed for the fact that the budget made no mention of FDI in retail, which is a need of the hour since the sector seriously requires the benefit of foreign investments into multi-brand retailing
Sanghvi said that the increase in the rural housing fund to Rs3000 crore from Rs2000 crore will offer several opportunities for real estate development in rural areas.
Puri added: “Raising the corpus of the Rural Infrastructure Development Fund from Rs16000 crore to Rs18000 crore would logically translate into the opening up the real estate potential of hinterland locations. However, similar provisions in the previous budget had no discernible effect. Much depends on how seriously actual implementation is taken.”