Colliers international sneak preview budget- 2012 -13


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All the sectors including real estate had a number of expectations from the budget. The budget provides incentives for housing sector including ECB for low cost affordable housing projects, increase in provision for rural housing and extension of the interest subvention scheme of 1 percent on housing loan etc.

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Colliers international sneak preview budget- 2012 -13

  1. 1. Q1 2012 | rESEARCHA Sneak PreviewUNION BUDGET 2012 -13 Budget Highlights | Real Estatemarket REACTION TO BUDGET Company Change (%) Finance Minister Pranab Mukherjee started his budget speech 2012-13 in the BSE SENSEX -1.19 backdrop of challenging macroeconomic scenario. The finance minister projects Realty Index -1.26 the economy to grow by 7.6% in the next fiscal up from 6.9% in 2011-12. He Anant Raj Inds -6.04 mentioned that due to adverse global economic sentiments there has been a D B Realty -2.02 slowdown in the Indian Economy but the fact is India still remains among the DLF 0.15 front runners in the economic growth in any cross country comparison. The Godrej Properties -2.82 budget aims at faster, sustainable and more inclusive growth across sectors HDIL -5.21 emphasizing on five focus areas including revival of domestic consumption, Hubtown Ltd. -4.13 rapid revival of high growth in private investment, removal of supply bottlenecks, Indiabulls Real Estate -1.95 addressing malnutrition in 200 high burden districts and expedite improvement Mahindra Lifespaces -0.72 in delivery system, governance and transparency. Orbit Corp. -3.37 Parsvnath Developers -4.04 From a real estate perspective, the budget remained silent on most of the major Peninsula Land -3.18 issues including status of STPIs (Software Technology Parks of India), Real Phoenix Mills -2.65 Estate Regulatory Bill, Land Bill etc. however, it mentioned that efforts are on to arrive at a political consensus on the issue of allowing 51% Foreign Direct Sobha Developers 3.04 Investment (FDI) in multi-brand retail. Sunteck Realty -1.13 Unitech -1.68 The key highlights of the budget which may impact real estateSource: | Mar 16, 2012 sector are as follows: - External Commercial Borrowings (ECB) for low cost affordable housing projects. Impact: Real estate companies developing large affordable housing projects with large fund requirements will benefit the most from the easing of external commercial borrowing (ECB) norms as interest rate charged is lower in case of external borrowings in comparison to rates charged by domestic institutions. - Increase in provision under Rural Housing Fund to INR 4,000 crore from the existing INR 3,000 crore.Impact: It will provide housing finance to targeted groups in rural areas at competitive rates. - Extension of the existing scheme of interest subvention of 1% on housing loans up to INR 15 lakh where the cost of the house does not exceed INR 25 lakh for another year. Impact: This will boost the affordable housing segment by providing cheaper loan to the end users.p. 1 | Colliers
  2. 2. Q1 2012 | rESEARCHUNION BUDGET 2012-13 key highlights (CONTD.) - Enhance the limit of indirect finance under priority sector from INR 5 lakh to INR 10 lakh. Impact: Indirect finance is the assistance given to any governmental agency for construction of houses or for slum clearance and rehabilitation of slum dwellers, the increase in limit would further pro- motes the affordable housing sector - Set up of Credit Guarantee Trust Fund. Impact: T: this fund is established to ensure better flow of institutional credit for housing loans. It will further ensure the easy availability of funds to promote affordable housing sector. - he rate of withholding tax on interest payments on external commercial T borrowings is proposed to be reduced from 20% to 5% for three years. These sectors are: power, airlines, roads and bridges, ports and shipyards, affordable housing, fertilizer and dams Impact: this would provide low cost funds to affordable housing and infrastructure sectors - Investment linked deduction of capital expenditure incurred in businesses like Cold Chain Facility, Warehouses for storage of food grains, Hospitals, fertilizers and affordable housing is proposed to be provided at the enhanced rate of 150%, as against the current rate of 100%. Impact: This will decrease the tax liability of the firms involved in above mentioned businesses and further boost the investments in logistics, hospitality and affordable housing. - nhancement of service tax from 10% to 12%. Impact: This increase is E expected to yield an additional revenue of INR 18,660 crore to the govern- ment being services the fastest growing sector, with 59% share in GDP. From real estate perspective it will further increase the real estate cost to end users. - Service tax exemption for construction service related to specified infra- strucure, cannals, irrigation works, post-harvest infrastructure, residential dwelling and low cost mass housing up to an area of 60 sq mtr. under the scheme of affordable housing. Further, the exemption limit for the monthly charges payable by a member to a housing society has been raised from INR 3,000 to INR 5,000. Impact: This will encourage affordable housing and other infrastructure related activities mentioned above.p. 2 | Colliers
  3. 3. Q1 2012 | rESEARCHUNION BUDGET 2012-13 key highlights (CONTD.) - Enhancement of the exemption limit for the general category of individual taxpayers from INR 180,000 to INR 200,000 this year. The budget also proposed new tax slabs as follows: Tax Rate Existing Tax Slab Revised Tax Slab Nil Up to INR 1.8 Lakh Up to INR 2 Lakh 10% Above INR 2 Lakh and Up to INR 5 Lakh Above INR 2 Lakh and Up to INR 5 Lakh 20% Above INR 5 Lakh and Up to INR 8 Lakh Above INR 5 Lakh and Up to INR 10 Lakh 30% Above INR 8 Lakh Above INR 10 Lakh Impact: Increase in disposable income in the hand of common man which will in turn increase the spending power and boost domestic investments - llow ECB for capital expenditure on the maintenance and operations for A toll systems for roads and highways so long as they are part of the original project. Fund Allocation for Pradhan Mantri Gram Sadak Yojana (PMGSY) has increase by 20% amounting to INR 24,000 crore and under Rural Infrastrure Development Fund (RIDF) to INR 20,000 crore Impact: Enhancement of the flow of funds to the infrastructure sector, these initiatives will indirecly boost real estate in long term. Allocation of INR 5,000 crore to each Housing and Urban Development Corpo- ration Ltd. (HUDCO) and National Housing Board (NHB) out of INR 60,000 crore limit for tax free bond for financiang infra related projects. Impact: This will encourage much needed home loan disbursements in affordable housing projects. It will also help in strenthening the investment environment through a combination of public investment and public private partnerships (PPP). - The budget envisaged to construct nearly 4,000 residential units for Central Armed Police Forces for which INR 1,185 crores is proposed to be allocated. Further a provision for INR 3,280 crore has been made for con- struction of office buildings including land acquisition and barracks to accomo- date 27,000 personnel. Impact: This will increase housing stock for para military forces.p. 3 | Colliers
  4. 4. Q1 2012 | rESEARCH From real estate perspective the budget seems to be neutral; the realty Index and most of the listed real estate companies behaved negatively after the budget announcement. The budget stated that during the twelth five year plan, infrastruture investment will go up to INR 50 lakh crore out of which 50% is expected to come from private sector. This will in turn enhance capital flow in the infrastructure sector and expected to indirectly give impetus to the real estate industry. Expectations 2011 Real Estate Perspective For Developers/Funds Expectations Results Simplification in FDI norms, more relaxation for FDI in Retail Expected in near future Introduction of GST to simplify taxation in Real Estate Implement from Aug 2012 Relaxation in the deadlines proposed under Revised DTC for Special Economic Zones NO Extension of the external commercial borrowing (ECB) scheme to the entire Indian Partially YES Real Estate Sector including Special Economic Zones and not only 100-acre townships, hotels, and hospitals. Extension of tax benefits under Sections 10A and 10B of the Software Technology NO Park of India (STPI) Act beyond FY11 for at least two-three years. Create Real Estate Regulatory Authority (RERA) for transperancy NO Infrastructure status’ to integrated townships and Group Housing under Section 80IA NO of the IT Act Extension of tax exemption under section 80 IA (4) for industrial parks NO Single window clearance for new projects NO Additional FSI to the developers to develop public parking and utilities NO Incentives for low cost housing technoligies and raw material in the form of reduction Partially YES in import duty, excise duty and sales tax Additional FSI for developing smaller affrodable houses (300-500 Sq Ft) NO For Housing Finance Expectations Results Companies (HFCs) HFC deposits to be brought under the ambit of 80C for income tax exemption NO For Individuals Expectations Results Reinstatement of the tax holiday benefits under Section 80IB– (10) for Affordable NO Housing projects. Increase in the exemption limit of home loan interest payable under section 24 (b) NO from 1.5 Lakh to 3.0 Lakh Tax bracket for rental income should be reduced from 30 % to 20 % NO Extension of the existing scheme of interest subvention of 1% on housing loans upto YES INR 15 Lakh where cost of the house does not exceed INR 25 Lakhs for another year Removal of Service tax on Under Construction Property NO Increasing the deduction u/s 24(a) of the IT Act for repairs, maintenance, etc. from the NO current 30% to 50%.p. 4 | Colliers
  5. 5. RESEARCH | 1Q 2012 Colliers International (India) provides property services to property Investors and Occupiers. We deliver customised service solutions utilising local and global knowledge in partnership with our 512 offices in 61 countries on 6 continents clients via our property Investment and Occupier service lines. These service lines include - Office Services, Facility Management, Project Management, Residential Services, Investment Services United States: 125 Canada: 38 and Valuation & Advisory Services. Latin America: 18 Asia Pacific: 214 EMEA: 117 For more information and research related queries please contact: $1.55 billion in annual revenue Surabhi Arora, Associate Director 2,179 million square feet under management Research Over 12,500 + professionals Tel: 91 0124 456 7580 Mumbai : Prabhu Raghavendra, Office Director India Research 31/A, 3rd floor, Film Center, 68, Tardeo Road, Mumbai, India - 400 034. Tel : 91 22 4050 4500, fax : 91 22 2351 4272 Amit Oberoi MRICS National Director, Valuation & Advisory; Research Delhi NCR : Ajay Rakheja, Office Director Email: Surabhi Arora MRICS New Delhi : tatesman House, 4th Floor, Barakhamba Road, Connaught Place, S Associate Director, Research New Delhi, India - 110 001 Email: Tel : 91 11 4360 7500 - 23, fax : 91 11 2335 6624 Sachin Sharma Gurgaon : Technopolis Building, 1st floor, DLF Golf Course Main Road, Sector 54, Gurgaon, Assistant Manager, Research India - 122 002 Email: Tel : 91 124 437 5807, fax : 91 124 437 5806 Heliana Mano Bengaluru : Goutam Chakraborthy, Office Director Assistant Manager, Research Email: Prestige Garnet, Level 2, Unit No.201/202, 36 Ulsoor Road, Bengaluru, India - 560 042 For general queries and feedback : Tel : 91 80 4079 5500, fax : 91 80 4112 3131 Tel: 91 124 456 7580 Pune : Suresh Castellino, Office Director Hotel Le Meridian, 101, R.B.M. Road, Pune, India - 411 001 Tel : 91 20 4120 6438, fax : 91 20 4120 6434 This report and other research materials may be found on our website at Questions related Chennai : Kaushik Reddy, Office Director to information herein should be directed to the Research Department at the number indicated above. This document has been prepared by Colliers International for advertising Heavitree Complex, Unit 1C, 1st floor, 23, Spurtank Road, Chetpet, Chennai, and general information only. Colliers International makes no guarantees, representations or warranties of any kind, India - 600 031 expressed or implied, regarding the information including, Tel : 91 44 2836 1064, fax : 91 44 2836 1377 but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Kolkata : Soumya Mukherjee , Office Director Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and Infinity Business Centre, Infinity Benchmark, Room No 13, Level 18, Plot G - 1, damages arising there from. Block EP & GP, Salt Lake Sector V, Kolkata - 700 091 West Bengal, India Tel : 91 33 2357 6501 , fax : 91 33 2357 6502 © Copyright 2012 - 2013 All Rights Reserved. Recent Reports : OFFICE Residential Property PROPERTY MARKET OVERVIEW Market Overview ASIA PACIFIC ASIA PACIFIC INDIA INDIA INDUSTRIAL MARKET OVERVIEW OFFICE MARKET OVERVIEW QUARTERLY UPDATE | JANUARY | 2012 QUARTERLY UPDATE | OCTOBER | 2011 December 2011 3Q 2011 Accelerating success. Accelerating success. Accelerating success. Accelerating success. This book is printed on 100% Recyclable paper Accelerating success.MK