Union Budget 2013-14: A Mixed Bag for Indian Real Estate
The real estate sector entered Budget 2013-14 with optimistic expectations, however, it found itself in a position where the budget didn't offer a transformational support but it also caused no significant harm.
Budget 2013-14 helps real estate sector only slightly.
Indeed, the real estate industry anticipated the Budget 2013-14, eagerly awaiting potential benefits and enhanced support from financial authorities.
Apart from the regulatory bill, industry status and single window clearances, the Finance Minister applied minor changes to real estate sector. The sector had anticipated these inclusions in Budget 2013-14.
Key Highlights and Impacts
Nevertheless, the financial plan incorporated commendable measures, which are expected to boost the housing sector, especially the affordable housing segment.
- Boost to Affordable Housing: By allowing a deduction of Rs. 1 Lakh on interest rates for first-time homebuyers for loans up to Rs. 25 lakh, the Finance Minister addressed buyer concerns. This action is poised to drive the increased demand for affordable housing options.
- Regulatory Authority for Roads: The appointment of a Regulatory Authority for the road sector, aiming to resolve issues pertaining to land acquisition, marks another constructive measure detailed within the budget. This regulator will address challenges encountered by developers during construction on specific corridors and will also be responsible for assessing the performance and policies implemented by the National Highways Authority of India.
Chidambaram has to cover his face as finance budget 2013-14 provide no better relief, as expected.
The budget also reduced the tax exemption for homes larger than 2000 sq. ft. from 75% to 70%. This change will particularly impact the luxury housing segment and will apply to properties valued over Rs. 1 Crore.
Industry Perspectives
Supertech Realty Group’s MD, Mr. RK Arora, expressed disappointment regarding the imposition of TDS on property transactions exceeding Rs. 50 lakh, saying that he felt "upset when he heard the news to levy TDS on property transactions beyond Rs.50 lakh" and predicted a "negative impact on the real estate market which is already sluggish".
Jones Lang LaSalle India’s Chairman & Country Head, Mr. Anuj Puri, considered the budget a moderate one overall, but described its impact on the real estate sector as "tepid". While recognizing the Rs. 1 lakh deduction benefit, he believed it would primarily advantage the affordable housing sector in tier-2 and tier-3 cities, rather than the entire industry.
According to Mr. Puri, the budget’s attention to education and job creation would indirectly benefit real estate. Education is now an emerging segment in real estate, and the focus in education will provide an impetus to the real estate market.
NAREDCO President and Raheja Group’s CMD, Mr. Navin Raheja, stated he had hoped the housing sector would receive infrastructure status. Another expectation was the deduction of cost of finance for the construction.
To summarize, Budget 2013-14 didn't provide significant advantages to the real estate sector. It is expected to offer targeted assistance by improving housing demand. Additionally, some builders are concerned that increased taxes on high-net-worth individuals could negatively affect luxury housing sales.