Decoding what Budget 2014-15 means for real estate

With a large number of offices and ITeS segment growth apart from residential growth coming from small tier II and tier III centres, the development of smart cities can bring opportunities for real estate developers, investors, end users and well as the housing loan sector.
On expected lines, the real estate sector and the infrastructure sector were the focus sectors of the government in the annual union budget of 2014-15. The finance minister announced a series of measures to bring investment into the sector while giving special emphasis on affordable housing. The announcement that Rs 8000 crore will be earmarked for rural housing along with a series of dedicated proposals augers well to the future of the realty sector in the country. Market analysts and real estate experts have given the budget a big thumbs-up as is focuses evenly on housing and development with both domestic and foreign investments in the sector.

 Smart City Development: Among the many big announcements in today’s annual budget, the finance minister has announced an allocation of Rs 7,060 crores for development of 100 new smart cities in the country. The move is likely to add a positive sentiment to the real estate segment in all these cities and neighbouring towns. With a large number of offices and ITeS segment growth apart from residential growth coming from small tier II and tier III centres, the development of smart cities can bring opportunities for real estate developers, investors, end users and well as the housing loan sector.

Easing of FDI: As a measure to enhance affordable housing the finance minister announced relaxation of FDI norms in the real estate sector. Industry experts are of the opinion that easing of FDI is likely to bring in opportunities for cheaper capital for smaller projects. The finance minister has announced a reduction in the size of projects eligible for FDI from 50,000 sq meters to 20,000 square meters and reducing the minimum investment limit for FDI to $5 million from the existing $10 million.
Emphasis on Affordable Housing: The government’s policy is easing of FDI norms are being seen as one big beneficiary move to bring affordable housing back on track. With expert reports suggesting a shortage of around 18.78 million houses in the country, the finance minister has allocated Rs 4,000 crore for low-cost housing alone apart from Rs 50,000 crore for urban housing. With Slum development being made a part of CSR activities, the government seems to have its heart in the right place.
Introduction of REIT- a Positive Sign: The introduction of real estate investment trusts (REITS) is applauded as a welcome move as it is likely to increase liquidity in the cash strapped sector. The Securities and Exchange Board of India has already issued guidelines for REITs and now with taxation structure getting clear in the annual budget, real estate sector is going to become a direct beneficiary of such trusts.

Increase in deduction limit on interest payment for housing loans: As part of its tax management and tax structuring, the finance ministry has increasing the home loan rebate on self-occupied property from Rs 1,50,000 to Rs 2,00,000. Income tax deduction limits under 80C on repayment of principal amount on housing loan has also been increased from Rs 1 Lakhs to Rs 1.5 Lakhs which is likely to make more people walk down the housing loan route in the coming year. This is a good news for banks too!
MoneyControl.com