A beginning has been made for low cost housing – Mr Anil Kumar Sharma, President, CREDAI-NCR

The budget for financial year 2014-15 has ushered in a number of positive changes for India’s beleaguered real estate sector

Despite fiscal constraints, the budget has raised the rebate on interest paid on home loans by 50,000 rupees to two lakh rupees per annum while exemption under section 80C has been raised to 2 lakh rupees from 1.5 lakh rupees. This means that while home buyers can now claim additional deduction of 50,000 rupees on interest payment under Section 24, they can also adjust additional principal repayment of 50,000 rupees on their home loan under Section 80C. Add to it, the exemption on personal income tax has been hiked to 2.5 lakh rupees from two lakh rupees. These incentives are likely to boost sentiment in the housing sector and spur serious buyers to purchase properties. Given the government’s commitment to fiscal consolidation, we now expect the Reserve bank of India to gradually cut interest rates if headline inflation rate remains stable. This will only further give a fillip to the real estate market as cost of loans comes down.

The budget also paved the way for launch of REITS in the country as it announced pass through tax status for the instrument, which now addresses the issue of double taxation. The introduction of REITS will allow real estate companies to sell their commercial projects, list them as investment trusts and give them an alternate source for capital mobilization. SEBI is now expected to soon come out with detailed outlines on REITs, and their launch is expected to bring in more transparency in the sector. Retail investors, who otherwise are unable to buy expensive commercial properties, will now ne able to own a stake in them through REITS. The budget has announced an initial outlay for 100 smart cities. We now expect the government to come out with details soon and that will allow real estate companies to be a part of this mega project. To facilitate FDI into smart cities, the size of projects has been reduced from 50,000 sqm to 20,000 sqm while the minimum investment limit has been halved to $5 million.

A beginning has also been made in the area of low cost housing, with the budget setting aside 4,000 crore rupees under National Housing Bank and slump development included in the list of CSR activities of corporates. This is in line with the government’s vision of providing housing to all by 2022 with India currently needing 25 million more dwellings. Thus, the scope for low cost housing is immense.

With just less than 45 days since the National Democratic Alliance government assumed charge, it’s a path breaking and holistic budget. While acknowledging positive announcements made in the budget, we now hope that real estate sector, which alone contributes about 6.3 per cent to GDP, will be given industry status. CCI Newswire