Budget 2013: A Mixed Impact on the Real Estate Sector
Despite high expectations, Budget 2013 did not bring significant benefits to builders and real estate companies, leaving the sector largely untouched. Nevertheless, there are some positives for first-time homebuyers.
Benefits for First-Time Homebuyers
First-time homebuyers stand to gain from Budget 2013, which proposes an additional deduction of ₹1 lakh. According to the budget proposal, homebuyers can claim a ₹1 lakh deduction on loans up to ₹25 lakh and ₹1.5 lakh on loans exceeding ₹25 lakh. This measure aims to encourage homeownership.
Finance Minister P. Chidambaram expects that enhancing the tax deduction threshold by ₹1 lakh will stimulate the housing market, allowing more people to enter the housing market.
Industry Reaction
Anuj Puri, Chairman of Jones Lang LaSalle India, expressed that Budget 2013 fell short of expectations for the real estate sector. While he views it as moderately beneficial overall, its direct impact on real estate is limited.
Impact on Housing Demand
The increase in the deduction rate for first-time homebuyers is poised to boost demand for new housing developments. These buyers can avail loans within the upcoming financial year, from April 1, 2013, to March 31 of the following year. This initiative should stimulate the market.
This move is anticipated to invigorate the real estate sector, particularly the housing segment. A thriving housing sector can also positively influence related industries, including steel, cement, brick, wood, and glass, contributing to broader economic growth.
Potential Concerns
However, increases in the prices of materials such as marble and other household goods could drive up property prices. This could potentially make homeownership less accessible for many people looking for affordable options.
According to Mr. Puri, the ₹1 lakh tax deduction may stimulate affordable housing demand, particularly in tier-2 and tier-3 cities, along with peripheral areas. However, its capacity to significantly enhance housing demand in metro and major cities might be constrained.
Unaddressed Issues
The budget remained silent on granting industry and infrastructure status to the real estate sector. Also, builders' requests for quicker project clearances remain unaddressed, with no improvements to the existing clearance processes.
Conclusion
In conclusion, Budget 2013 provides only a moderate boost to the real estate sector. While affordable housing may see some gains, rising property prices due to increased material costs could offset these advantages.