Union Budget 2014: A Big Thumbs Up for the Real Estate

• Reduction of the minimum built-up area and capitalisation for FDI in Real Estate with a 3 year post completion lock-in.
• Introduction of Real Estate Investment Trusts (REITs) and Infrastructure Investments Trusts (InvITs) with necessary incentives and tax efficient pass through status.
• Enhancement of tax incentives and exemption limit for individual investor.
• Allocation of fund for development of 100 ‘Smart Cities’

Union Budget 2014 Proposes Substantially More Benefits for the Real Estate and Infrastructure Industry than the Five Combined Previous Budgets

High expectations were set from the first budget of the NDA government after having been voted to power with a landslide victory mainly on promises of “happy days” for India’s 1.2 billion people.Staying true to the expectations, Finance Minister ArunJaitley finally unveiled the Union Budget 2014-15 with a host of proposals withwelfare schemes and reformist policy measures aimed at a wide range of stakeholders, including the real estate sector which has received a big thumbsup in this year’s Budget.

The real estate sector which was quite hopeful onthe outcome of the Budget, has heaved a sigh of relief as the finance minister has cheered up the sector by announcing a handful of measures and allocations, while delivering his maiden national Budget.This is a positive sign for the sector.

Reacting to this pro-industry Budget, a jubilant Joe Verghese, Managing Director, Colliers InternationalIndia, says, “A big thumbs up to the Budget from all the real estate stakeholders – the developers, investors and the consumers. This Budget has proposed substantially more benefits for the real estate and infrastructure industry than the five combined previous budgets. Most of the industries’ wish-list, such as relaxation in FDI, pass through status to REITs and tax incentives for consumers have been incorporated in the Budget.”

“The 6 week old government has laid down a bold and unambiguous policy intent that aims to resurrect the economy through prudent fiscal measures and an impetus for development especially in the infrastructure and manufacturing sectors,” says Amit Oberoi, National Director, Valuation & Advisory Services, Colliers International India.

With an aim of ‘sab kasaath, sab kavikas’, the finance minister has announced various policy related changes. Lauding other countries for REITsthat have been successfully used REITs as instruments for investment pooling, the Finance Minister announced necessary incentives for REITs. As an innovation, a modified REITs type structure for infrastructure related projects hasalso been announced as Infrastructure Investment Trusts (InvITs). It has not only allocated a sum of INR 7,060 crores for the development of ‘100 smart cities’, but also reduced the requirement of the built-up area and capitconditions for FDIIn a nutshell, the Budget 2014-15 will certainly work as an energy booster for the Indian real estate sector.

Suresh Castellino, National Director, Investment Services, says “With the introduction of REITs, capital held up in Grade A commercial assets will free up and will be available to churn in the Commercial asset class or any other investment avenue. FDI in Real Estate which has been on the decline in the last 3 years is now expected to revive. The relaxation of minimum area and minimum capitalization will also help boost the investor confidence. With the outcome of the elections and a stable Government at the Centre, the overall sentiments have turned extremely positive, and with these policy level changes we expect that Institutional Investors, both Domestic as well as Overseas will show increased interest and their appetite to invest in Indian Real Estate will be enhanced. . On the residential front, Institutional Investors are aggressively scouting around for opportunities across Tier 1 markets, however, most Investors are more focused on the low to mid segment, with limited traction in the Premium Homes. The absorption volumes in the residential asset class have been slow of late, but these are expected to increase towards the end of this year, more so with the increased deduction on interest on Home Loans. However, we may not witness any major capital appreciation in this asset class till the last quarter of this year.” CCI Newswire