The budget for financial year 2014-15 has ushered in a† number of positive changes for Indiaís beleaguered real estate sector. The sector, which has been reeling under the twin impact of slowdown in demand and high interest rates, got a boost in the budget that clarified tax status of REITS, allocated a sizeable 7,060 crore rupees for construction of 100 smart cities, gave tax sops on purchase of houses and eased the norms governing flows of foreign direct investment into projects.
Despite fiscal constraints, the budget has raised the rebate on interest paid on home loans by Rs.50000=00 to Rs.2,00,000=00 per annum while exemption under section 80C has been raised to Rs.2,00,000=00† from Rs150000=00. This means that while home buyers can now claim additional deduction of Rs.50000=00 on interest payment under Section 24, they can also adjust additional principal repayment of Rs.50000=00 on their home loan under Section 80C. These incentives are likely to boost sentiment in the housing sector and spur serious buyers to purchase properties. Given the governmentís 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.
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, itís 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.†
Increased activity in the real estate sector will have a multiplier effect on the economy and we may see days of good growth and prosperity in the Indiaís Economy.
SG Estates is developing number of Group Housing Projects in Vasundhara, Raj Nagar Extn. and Govindpuram.
SG Oasis and SG Homes in Vasundhara are located at prime location of Vasundhara and at distance of around 4.5 kms from Vaishali Metro Station and are under construction.SG Impression Vasundhara is successfully delivered and occupied.
SG Grand in Raj Nagar Extn. SG Impressions 58, SG Impressions Plus are successfully delivered and fully occupied.
SG Benefit in Govindpuram is under construction.
SG Estates offers residential units in the range of Rs.25 Lacs-100 Lacs.
SG Estates Ltd.†