Anuj Puri, Chairman & Country Head, Jones Lang LaSalle Meghraj
POSITIVES
The fact that India Infrastructure Finance Company (IIFCL) will be given more flexibility and has been authorized to raise Rs 100,000 crore in for the development of the infrastructure sector is an indirect boon to the real estate industry. Of late, an increasing number of infrastructure projects have a real estate component by virtue of a cross-subsidization principle. Therefore, boosting infrastructure projects gives an impetus to real estate, as well.
The intended clearing of regulatory bottlenecks for infrastructure projects will help bring forward many pending projects, thereby boosting the construction sector.
The fact that allocation for the NHAI has been increased will mean improved and accelerated connectivity, raising the value of existing real estate along these routes and also opening up new areas for development.
Allocation for JNNURM has been substantially increased. This is good news for urban infrastructure in general. JNNURM has been instrumental in proving road and rail connectivity in urban and suburban areas, and this will give a significant boost to mass housing schemes on the fringes of the metros.
The increased allocations towards Rural Electrification Scheme, the Rural Housing Fund and Rural Road scheme may serve to improve the real estate markets in far-flung areas and may also help to reduce inward migration from the villages by providing industrial growth in the hinterlands. This may herald the beginning of organized real estate in the semi-urban and rural areas.
The increase of funding for the Commonwealth Games will vastly enhance development potential in the Delhi NCR region and have direct positive implications for the hotel industry in this sector.
The facts that manufacturers of prefabricated concrete slabs and will now have a tax relief and that goods made at construction sites now have their exemption reinstated spells good news for developers of lower income housing segment, who depend largely on low construction costs.
NEGATIVES
The increase in Income tax exemption limits is not sufficient to make a significant difference in buyers’ purchasing power, but may serve as a feel-good factor.
STPI units will have to bear a higher burden of Minimum Alternate Tax (MAT). This is an indirect endorsement of SEZs, and in line with the Government’s stance to phase out benefits to STPI projects, thereby encouraging migration into SEZs. However, the Government is silent on the cost implications on the commercial use of STPI units that have hitherto enjoyed higher FSI at no extra charge.
The allocation increase to the Rajiv Awaas Yojna will enhance the prospects of urban slum dwellers of getting better quality housing. This scheme under JNNURM is intended to promote support and property rights to people living in slum areas.
The Budget did not mention FDI into the real estate sector or REITs and REMFs. We are also disappointed about the lack of affirmative action on increasing tax exemptions on housing loans, principal repayment and interest.
No mention was made on the undoing of service tax on rentals which were introduced in the previous budget. This is not going to improve the status in terms of commercial and retail leasing.
There is a lack of measures in terms of end user facilitation, boosting of buyer sentiments and the growth of mass housing.
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