Budget 2014: A stride towards growth and expansion in real estate sector

The pro-trade stance of the new government is evident with the budget 2014 and the array of incentives for real estate sector, a sector which contributes more than 5% to Indian GDP. Believed to be trendsetting for the Indian economy, budget 2014 brings provisions for further growth of the housing sector in India.

Closely linked and dependent upon the availability of infrastructure, the real estate sector has been reassured with substantial allocation of 7,060 crore for growth of infrastructure across 100 smart cities in the country. Known to be the spine of growth for numerous ancillary sectors, with this allocation, the real estate sector will witness appreciation of assets and improved livability indices to be the immediate outcomes.

One of the most important takeaways from this budget that helps the common directly is the purchase of homes made more attractive for the middle class. This was effected by raising the deduction against interest payment on home loans from the taxable income to INR 2, 00,000 from the original INR 1, 50,000. Enabling a home buyer to save an additional amount of INR 15,450 from their liability, the budget will also, in effect, lower interest rates for home loans. Likewise, the slum redevelopment initiatives by private sector are also expected witness an upscale owing to its inclusion into the Corporate Social Responsibility domain in the budget.

Strikingly, the investments, a significant element for growth of real estate sector are now expected to augment with a ‘pass through’ status given to REITs. Along the course that has been paved for REITs, the commercial realty sector will significantly benefit with investment in stocks similar to the structure of mutual fund trade in India.

Moving forward, a boost has been granted to Foreign Direct Investments by reducing the minimum built-up area requirement for FDI funded projects. From 50,000 sq. mt, the norms have now been rationalized to the minimum levels of 20,000 sq. mt. to attract more foreign venture capitalists. Furthermore, the reduction proposed ($10 million to $5 million) in the minimum paid-up capital for wholly owned subsidiaries of foreign partners will draw more foreign investments in the Indian property market.

The budget, year on year, is continually regarded with diverse and at times conflicting outlooks across the segments of India Inc. As voiced by various stakeholders in the realty sector, the logjams in approval mechanism, lack of a roadmap for the revival of SEZs and availability of cheaper loans for all segments of construction, still remain a concern. However, this time around, the fresh hopes of growth for Indian economy realized by a stable polity at the center have been able to effect greetings to the budget 2014-15.

The budget aims to aid sustainable growth and development for realty sector in the coming years. Already showing signs of revival with strengthening market sentiment, growth for realty sector has been reassured with the budget 2014 which aims for inclusive growth while the government upholds its commitment to the maxim “More Governance, Less Government.”