Not much expected for real estate sector
Budget 2008-09 is unlikely to offer much for real estate as a surge in housing prices coupled with an usually high flow of credit to the sector in recent years have made policy makers somewhat cautious. Both the government and the central bank would like to see the sector cool off a bit.
Analysts expect the budget to focus on demand for affordable housing, given that it would be last regular budget of the UPA government.
“The budget will probably dwell on housing and home loan policies for the economically-weaker section of the society, said G.P. Savlani, resident director, Confederation of Real Estate Developers’ Associations of India (CREDAI), the apex body of the real estate sector in the country.
It could announce more funds for the government’s ambitious Jawaharlal Nehru National Urban Renewal Mission, which is engaged in developing civic amenities and infrastructure in cities and towns, Savlani said.
There are expectations that Finance Minister P.Chidambaram may consider tax incentives for real estate investment trusts, which are expected to help development of commercial properties, but officials are looking for more clarity on draft guidelines for such trusts issued by the Securities and Exchange Board of India.
That said, the real estate sector has a long wishlist for the FM and hopes that at least some of its wishes would find their way into the forthcoming financial bill. The sector’s apex body has already submitted its pre-budget expectations to the finance ministry.
On top of the list is creating a federal regulatory authority -- which the government has been promising for a long time – to address investors’ concern. “Tax exemptions on home mortgage need to stay and incentives should be given to both the seller as well as the buyer vis-a-vis affordable housing. The budget should also address the long-pending demand for rationalization of stamp duties across the country,” said Sanjay Verma, managing director of Cushman & Wakefield, South Asia.
The industry also wants the reinstatement of the tax holiday under Section 80 IB (10), which was not extended beyond 2007. “The benefits for a developer to build an industrial park that lapses in 2009 should also be extended to 2015,” Savlani said.
Surprisingly. the real estate industry has also come out with a ‘solution’ to the problem of affordable housing. Called special residential zones (SRZs), documents detailing the concept have already been submitted to the ministry of urban development.
“Special residential zones need to be created to cater to the housing needs of the 360 million people who will live in urban areas by 2010. Tax incentives on the lines of special economic zones should be given to SRZs so as to give a fillip to low-cost housing. Otherwise, with rising land rates, it becomes difficult for a builder to construct budget houses,” said Pradeep Jain, chairman and managing director, Parsvnath Developers.
Other demands by the industry include putting in place a plan to facilitate faster project approvals as well as taking steps to reduce the prices of steel and cement in a bid to bring down the construction costs.
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