Low-income housing gets major benefits,but not much for sector

Mukherjee announced continuation of the concessions offered earlier to the sector. He said that in order to provide one-time interim relief to the housing and real estate sector impacted by the recession,“I propose to allow pending projects to be completed within a period of five years instead of four years for claiming a deduction on their profits.” Projects approved between April 1,2007 and March 31,2008 have been exempted from paying any tax on their profits. Removing the caveat that these projects had to be completed by March 2012 to avail of this tax holiday,Mukherjee extended the deadline to March 2013.

While a slew of measures had been announced by the government in 2009 to boost affordable housing sector,the Union Budget 2010-11 has laid additional emphasis on it by extending the deadline by another year on the interest rate subvention of one per cent on home loans up to Rs 10 lakh,making a provision of Rs 700 crore this fiscal. The subsidy is likely tp translate into a saving of Rs 28,920 on interest payment in case of a five-year loan and up to Rs 1.51 lakh in case of a 20-year loan. “It is a direct support to the sector as during the slowdown some projects did get delayed but now the developers will continue to get the tax benefit in affordable housing projects under Section 80 IB (10),” said Pradeep Jain,chairman Parsvnath Developers. According to Prof PSN Rao,head of housing at New Delhi-based School of Planning and Architecture “The real-estate sector is all about demand and supply. In India,demand far outstrips supply. In order that the wheel of real estate moves and carries the economy forward,demand and supply both have to be fuelled. The government has attempted exactly that. By continuing with the 1 per cent interest subsidy for sub-Rs 20 lakh housing units,demand has been fuelled,” he reasoned.

“Developers who were hoping for additional incentives from the Budget can still optimally leverage the existing demand by concentrating on rational pricing and committed delivery of their projects,” says Anuj Puri,country head,Jones Lang LaSalle Meghraj.

Indicating its resolve carry forward the aam aadmi agenda,the FM extended largesse to rural housing under the Indira Awas Yojana by enhancing the cost per unit to Rs 45,000 in plain areas and Rs 48,500 in hilly areas and allocating Rs 10,000 crore for the centrally sponsored scheme. Even though allocation has been hiked by 700 per cent to Rs 1,270 crore for Rajiv Awas Yojana announced last year,most of the fund will go into preparatory work,insist officials. “If states that have prepared the model framework to assign property rights to slum dwellers come forward with slum housing plans,their requests will be taken up this year itself,” said a senior housing and urban poverty alleviation ministry official. But the private sector,which the government wants to rope in to fulfil the slum-free India or Rajiv Awas Yojana scheme,has expressed its disappointment at being overlooked. “We had recommended that the central support under Rajiv Awaas Yojana be passed to the party which is executing the project under Public Private Partnership model instead of passing the benefits to the state government or its agency which has not been considered,” said Naveen Raheja,MD,Raheja Developers Limited.

But real estate developers also see hope in the fact that the Finance Minister’s proposed measures would propel construction growth in the Tier II cities,where housing costing less than Rs 20 lakh is mostly available. “There will be a significant perk-up in transaction volumes in tier II and tier III markets. This is significant because these markets were perceived to be losing steam of late. Therefore,we are once again looking at the prospect of balanced growth,” says Anuj Puri,country head,Jones Lang LaSalle Meghraj. Echoing similar views,President of the Confederation of Real Estate Developers of India (CREDAI) Santosh Rungta said Tier II cities would gain as the loan limit has not increased. By raising the exemption limits in the Income Tax,the government has sought to financially empower the consumers,which would boost real estate sales. “It will strengthen the purchasing power of the buyers,” argued Delhi-based Supertech Limited’s CMD R K Arora. Mukherjee’s announcement to partially roll back the excise duty on cement cement products is expected to lower the input cost,rendering real estate projects economical.

However,the Budget had nothing to say on opening up real estate sector further to foreign direct investment (FDI),nor did it mention any steps to operationalize the Real Estate Investment Trusts (REITs) and Real Estate Mutual Funds (REMFs) being demanded by the sector for a long time.