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Budget 2012: Real estate welcomes initiatives to boost growth of industry

The Economic Times
 

We find out what industry bodies have to say about the Budget:

Measures to gear up growth

For the real estate sector, this Budget has exceeded expectations, given the pressure on the fiscal situation. Most importantly, it has taken into account the crying need to focus on affordable housing by allowing external commercial borrowing (ECB) for low cost housing, roads, and construction . Withholding tax on ECB for affordable housing has been reduced from 20 percent to five percent for three years. This will help ease the liquidity situation in the sector.

Also, an investment-linked deduction of capital expenditure in affordable housing is proposed to be provided at 150 percent as opposed to 100 percent. All these measures will encourage the supply of low cost housing.

For the homebuyer, the one percent interest subsidy scheme has not been rolled back. However, there were expectations of increasing subsidies through this scheme. Participation of foreign institutional investors (FIIs) to widen the corporate bonds markets is also a very positive development and will open up opportunities for real estate companies.

The country needs infrastructure growth and the Budget has not disappointed on this front as well.

The doubling of allocation for infrastructure debt funds through allocations to NHDP, IIFCL, NHB and SIDBI, coupled with full exemption from basic customs duty for equipment for road and highway construction, are likely to boost infrastructure and construction sectors.

Further, measures such as credit guarantee and direct transfer of subsidy are likely to change the growth environment. The one year extension of the sunset clause on tax incentives for infrastructure projects under Section 80IA is also a welcome step.

While the construction sector will benefit from the higher allocation to infrastructure and investment-linked deductions , the increase in excise duty will result in cement prices going up by Rs 4-5 per bag. This will hurt the profitability of construction companies.

Sachin Sandhir, Managing Director, RICS South Asia

Time to build infrastructure

L Krishnan Chairman, CII - Karnataka

For the coming financial year, the expectations from the industry are high. Most significant is the control of inflation. The government should also take steps to control the fiscal deficit and reduce wasteful subsidy.

By reducing interest rates, other sectors of the economy can improve.

Time to build infrastructure

For the coming financial year, the expectations from the industry are high. Most significant is the control of inflation. The government should also take steps to control the fiscal deficit and reduce wasteful subsidy.

By reducing interest rates, other sectors of the economy can improve.

This will spur consumption and growth. A stable currency will ensure positive growth in the economy . We need to build urban infrastructure , provide connectivity , and reform the education sector with more vocational educational options.

L Krishnan Chairman, CII - Karnataka

Boost for affordable housing

The coming financial year will witness many changes in the real estate sector. There is a lot for the consumer to look forward to in the coming financial year as realtors and developers get more proactive. The affordable housing segment has received many boosts. Urban areas and metros will see more affordable housing projects and more buyers will emerge from the middle class. You will see an upward trend in the budget housing market. The housing sector will also look for inroads into Tier II and III cities and rural housing will get a boost.

Though the TDS of one percent on property transactions has been introduced in the Budget, some have been spared as this applies only on transactions above Rs 50 lakhs. There is a strong buzz that the Reserve Bank of India (RBI) is considering a decrease in the repo rate in the second quarter of the financial year 2012-13.

The announcement on external commercial borrowings (ECB) for affordable housing with a reduction in withholding tax on ECB interest will reduce the burden on developers by bringing down the cost of raising funds. The Credit Guarantee Trust Fund will also encourage investments in affordable housing All this adds up to good news for prospective homebuyers in the affordable housing segment.

Sumitra Iyengar Spokesperson Confederation of Real Estate Associates (India) Bangalore

Interest rates should come down

The construction industry is witnessing a slump due to the high finance costs. Inflation and high interest rates have affected the real estate industry. The government regulations are becoming strict. If the GST becomes a reality it will become more rigid for the industry. Registering property costing more than Rs 20 lakhs needs PAN. All this is effective in cleansing the system.

In the new financial year, the industry will recover if the home loan interest rates go down. There are strong indications of this happening, as major banks are considering this move. Though large scale external commercial borrowing in happening in the housing sector, the demand is not very strong. If the interest rates come down and the IT sector does well, the realty segment will bounce back.

J R Bangera President, FKCCI





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