News & Views on Indian Real Estate

Tuesday, March 04, 2008

Mixed Bag......

Union Budget 2008 evoked mixed reactions from realty sector. The budget mentioned there will be a boost in the country’s socio-economic infrastructure with due emphasis on education, health and hospitality sector. The boost in housing sector will take place due to the increase in income tax exemption limit to Rs.1.5 lakh (Rs.110000) and new tax slabs as it will increase the affordability of equated monthly installments pertaining to new and existing housing loans. The real estate sector will also benefit from the amendment relating to dividend distribution from a subsidiary to a parent company, as this is prevalent in the sector.

However, there has been no relief on service tax on rentals which will continue to increase pricing pressure, though in the short to medium term this will not have a drastic impact as supply outstrips demand. Eventually, the burden would be passed on to tenants. A reduction in duties and service tax benefits directly to consumers would have propelled the demand for realty across the country.

Further, Real estate industry says that tax holiday on establishing hospitals anywhere in India and specially in tier-2 and tier-3 cities will fuel growth in these cities and attract investment.

According to some, this Budget was a political Budget meant for certain section of people. Some were expecting Service tax exemptions for the urban area low-cost housing. Also there was no mention of privatization of the airports and ports and about so many other areas of infrastructure. On the other hand some believe that the budget will have positive impact on the real estate industry expecting the construction cost to come down due to duty and central value-added tax reduction. The Indian real estate sector has welcomed the overall impact of budget while saying that it could have done more for the industry.