Impact of Budget 2014 on Indian Real Estate
Impact of Budget 2014 on Indian Real Estate. With the budget of Modi government, the foundation bricks of “Ache din” by the Finance Minister for the realty sector. To pave the road for future development and infuse positive sentiments in the market, the sector was eagerly waiting for this budget. And with a slew of progressive measures announced, here’s the Impact of Budget 2014 on Indian Real Estate
| Industry Expectations | The Budget States | Impact on the sector | CF Views |
| Ease in FDI investments | *Requirement of the built up area and capital conditions for FDI reduced from 50,000 square metres to 20,000 square metres and from US$ 10 million to US$ 5 million respectively for the development of smart cities. | *With smooth minimum threshold conditions in FDI, there will be a spur in opportunities for cheaper capital in smaller projects, as opposed to larger projects earlier.
*The reduction in built-up area and size will give smaller developers access to FDI. *All in all, it will boost the affordable housing, which is the dire need of the country. |
*Will impact the sector positively.
*Prices might go high |
| Smart Cities | *A sum of Rs 7,060 crore has been sanctioned to develop “100 smart cities”, as satellite towns of larger cities and by modernizing the existing mid-sized cities. | *These smart cities will serve as counter magnets to the already existing overpopulated cities.*It will lead to the steady and holistic growth of the cities.
*With the development of smart cities, avenues for employment will come up which, in turn, will enhance the housing demand. |
*With FDI norms relaxed, these smart cities will also get a fillip.*However, there are chances that speculations might run the show in these smart cities.
*Good in intent, but implementation with utmost seriousness. |
| Tax incentives for REITs | The Union Budget has proposed tax pass through status for Real Estate Investment Trusts (I-REITs) in India. | *Companies with considerable commercial assets will have liquid income, which will reduce the prevailing debt situation.*As REITs exclusively target completed properties with clear title, it will also lead to faster project completion, and will also bring-in the much needed transparency.
*With debt reducing, economy will also get back on the track. |
*Could be a potential game changer. However, clarity is awaiting on the nature of tax sops, the imminent listing of I-REITs. |
| Policies for Housing for All by 2022 | *The deduction limit on account of interest on loan in respect of self occupied house property.
*Investment limit under section 80C of the Income Tax Act. It is from Rs 1 lakh to to Rs 1.5 lakh. *Inclusion of slum development in the list of Corporate Social Responsibility (CSR). |
*Will promote affordable housing*Deduction in the home loan interest will leave more disposable income in hand. Which will encourage lot of young buyers to take a plunge in the market. | *Great initiatives to promote housing for all. |
| Incentives for industry | *Rs 100 crore provided for setting up a National Industrial Corridor Authority, with its headquarters in Pune. | *NICA will help in better coordination and implementation of the 5 industrial corridor projects. | |
| Making SEZs effective and removing SEZ units from Minimum Alternate Tax (MAT) purview | Steps to revive SEZs and make them effective instruments of industrial production, economic growth, export promotion and employment generation. | *An important initiative for manufacturing sector. | *Though initiated, there is still no clarity on this.*No clarity on land acquisition
* No reduction on MAT. |
| Measures for Rural Development | *Pradhan Mantri Gram Sadak Yojana (PMGSY) is proposed with a funding of Rs 14,389 Cr*Rs 8,000 Cr has been allocated to the National Housing Bank for Rural Housing Scheme through Rural housing fund. | *It will improve the road connectivity with an indirect impact on proposed industrial corridors and smart cities. | Will benefit the sector |
| Measures for Urban Renewal | *At least 500 habitations with poor physical infrastructure such as water supply, sewerage, drainage, electricity, food and solid waste management will be renewed with necessary facilities in ten years | *The connectivity and accessibility will improve, which will have direct impact on Residential Real estate
*Commercial real estate near these new airports will get a boost |
With improved connectivity, new airports and better infrastructure, real estate sector will definitely get a shot in the arm. |
| Reforms in PPP | *An institute called 3P India will be set up with a corpus of Rs 500 Cr facilitating to mainstream PPP’s with better and sophisticated models of contracting and develop quick dispute redressal mechanism | *Partnership between the government and private players will boost the Infrastructure in a significant way. | Will encourage lot of infra-development |
| Development of new expressways | *a sum of Rs 37,880 Cr is allotted for the construction of highways and expressways to NHAI, which includes Rs 3000 Cr proposed in North East. | *North-East that has been excluded till now finally got a lion’s share. With improved connectivity, there will be lot of growth opportunities. |
