Posiview Insight: Union budget 2014-15: Impact on Real Estate Industry Posiview Consulting Partners is a Real Estate focused boutique invest banking and corporate advisory firm. Having executed more than 100 projects successfully over the last 10 years, we work with our Developer partners closely to support them from land acquisition, feasibility, fund raise from Banks and PE Funds and project strategy and monitoring till completion. We believe that the Union Budget 2014-15 impacts the Real Estate industry in several indirect ways which has been missed by the mainstream media and our point wise analysis covers these aspects. CA Vinit V Deo Chairman and Managing Director

1. Impact
on
Union
Budget
2014-­‐15
on
Real
Estate
Industry
CA
Vinit
V
Deo
Chairman
&
Managing
Director

2. Financing
in
the
Real
Estate
Sector
§ To
provide
necessary
incen9ves
for
REITs.
As
an
innova9on,
a
modified
REITS
type
structure
for
infrastructure
projects
is
also
being
announced
as
Infrastructure
Investment
Trusts
(InvITs),
which
would
have
a
similar
tax
efficient
pass
through
status,
for
PPP
and
other
infrastructure
projects.
Adequate
REITs
will
cut
pressure
on
exis9ng
bank
lending.
§ Na9onal
Housing
Banking
program;
to
set
aside
Rs.
8000
crore
for
the
program
for
Rural
Housing.
§ To
encourage
development
of
Smart
Ci9es,
which
will
also
provide
habita9on
for
the
neo-­‐middle
class,
requirement
of
the
built
up
area
and
capital
condi9ons
for
FDI
is
being
reduced
from
50,000
square
metres
to
20,000
square
metres
and
from
USD
10
million
to
USD
5
million
respec9vely.
Posiview
Insight:
This
will
improve
liquidity
in
the
sector
and
will
open
new
avenues
of
financing.

3. Incen@ve
to
buyers
§ Raises
80C
investment
cap
to
Rs
1.5
lakh.
§ Hikes
housing
interest
rate
deduc9on
limit
to
Rs
2
Lakh.
§ No
change
in
tax
rates.
Income
tax
exemp9on
hiked
by
Rs
50,000
to
2.5
lakh.
§ Income
tax
exemp9on
hiked
by
Rs
50,000
to
2.5
lakh.
Posiview
Insight
:
These
tax
deduc>ons
would
mean
that
a
person
can
get
an
addi>onal
deduc>on
of
Rs
1.50
lakhs
in
his
taxable
income
which
means
a
saving
of
Rs
45,000
pa
or
Rs
3750
pm
in
monthly
outgo
at
the
highest
slab
rate.
This
can
increase
the
housing
budget
by
Rs.
4
Lakhs
which
is
a
25-­‐33%
increase
for
the
affordable
segment
houses
in
the
range
of
Rs
20-­‐25
Lakhs.

4. Affordable
Housing
§ Changing
rules
governing
low
cost
housing.
§ Mission
for
low
cost
housing
proposed
to
incen9vize
development
of
low
cost
housing;
Rs.
4000
crore
announced.
§ Projects
which
commit
at
least
30
per
cent
of
the
total
project
cost
for
low
cost
affordable
housing
will
be
exempted
from
minimum
built
up
area
and
capitaliza9on
requirements,
with
the
condi9on
of
three
year
lock-­‐in.
Posiview
Insight:
The
tax
benefits
combined
with
the
opening
of
the
sector
completely
for
Foreign
Direct
Investment
should
see
significant
ac>vity
in
this
space
in
the
coming
year
especially
in
view
of
the
shortage
of
almost
1.8
cr
houses
as
per
the
Economic
Survey.

5. Urban
Development
§ To
spend
Rs
7,060
crore
for
100
smart
ci9es,
as
satellite
towns
of
larger
ci9es
and
by
modernizing
the
exis9ng
mid-­‐sized
ci9es.
To
provide
the
necessary
focus
to
this
cri9cal
ac9vity.
§ Urban
renewal
will
address
drinking
water,
use
of
recycled
water,
solid
waste
management,
digital
connec9vity;
500
habitats
supported.
§ FM
announces
development
of
Metro
rails
in
PPP
mode;
Rs.
100
crore
set
aside
for
metro
scheme
in
Ahmedabad
and
Lucknow.
§ Slum
development
to
be
included
in
Corporate
Social
Responsibility
ac9vi9es.
§ Proposes
50000
crore
for
urban
infra
projects.
§ Proposes
Metro
projects
in
ci9es
with
20
lakh
people.
Posiview
Insight:
This
comprehensive
package
will
give
a
new
lease
of
life
to
the
Ci>es
which
are
on
the
suffering
due
to
crumbling
infrastructure
and
thus
give
a
boost
to
the
real
estate
sector
and
provide
viability
gap
funding.

6. Rural
Development
§ Aiming
at
total
sanita9on
for
all
households
by
2019.
§ “Deen
Dayal
Upadhyaya
Gram
Jyo9
Yojana”
for
feeder
separa9on
will
be
launched
to
augment
power
supply
to
the
rural
areas
and
for
strengthening
sub-­‐transmission
and
distribu9on
systems.To
provide
Rs
500
crore
to
boost
rural
power
infrastructure.
§ Rs.
3600
crore
set
aside
for
Na9onal
Rural
Drinking
Water.
§ Pradhan
MGSY
has
a
massive
impact
on
rural
development;
sets
aside
Rs.
14,389
crore
for
this.
§ Rural
Fund
corpus
will
raise
to
30,000
crore
in
FY15.
Shyama
Prasad
Mukherji
Rurban
Mission
will
be
launched
to
deliver
integrated
project
based
infrastructure
in
the
rural
areas,
which
will
also
include
development
of
economic
ac9vi9es
and
skill
development.
Posiview
Insight:
The
Government’s
target
to
revive
the
rural
economy
of
India
will
lead
to
a
balanced
growth
and
relieve
the
pressure
of
migra>on
to
the
ci>es.

7. Tax
Reforms
§ To
approve
Goods
&
Services
Tax
by
end
of
year.
To
approve
Goods
&
Services
Tax
by
end
of
year.
§ Propose
to
strengthen
authority
on
Advance
Tax
Rulings.
Posiview
Insight:
Government’s
decision
to
not
implement
the
Direct
Tax
Code
in
its
present
draconian
form
and
push
to
implement
the
GST
by
year
will
take
India
to
a
new
era
of
the
tax
payer
friendly
administra>on
and
result
in
beVer
compliance.

8. Industrial
Real
Estate
§ Effec9ve
steps
to
be
taken
to
revive
SEZs.
§ Announces
Rs.
200
crore
for
6
more
tex9le
clusters
in
Rae
Bareily,
Lucknow,
Surat,
Bhagalpur.
§ Proposed
an
alloca9on
of
Rs.
5,000
crore
for
the
fund
for
the
year
2014-­‐15
for
urgent
need
for
scien9fic
warehousing.
§ Ini9al
corpus
of
Rs.
100
crore
for
development
of
industrial
corridors
for
the
smart
ci9es.
Posiview
Insight:
The
new
Government’s
thrust
on
reviving
manufacturing
growth
as
a
key
driver
of
na>onal
economy
will
also
create
opportuni>es
for
Real
estate
developers
to
enter
the
Industrial
development
segment.

9. Infrastructure
Development
§ The
budget
has
allocated
a
total
of
Rs
37,880
crores
towards
the
NHAI
for
the
construc9on
of
the
highways,
and
an
addi9onal
Rs.
3,000
crores
to
boost
road
connec9vity
in
the
North
East.
It
has
targeted
comple9on
of
8,500
Kms
of
Na9onal
Highways.
§ The
development
of
16
new
ports
has
been
proposed
at
the
outlay
of
Rs.
11,000
crore.
§ Long
Term
loans
for
Infrastructure
projects
without
restric9ons
like
CRR,
SLR/
priority
sector
lending
norms.
Posiview
Insight
:
Infrastructure
development
will
act
a
major
catalyst
to
Real
Estate
development.

10. Ca
Vinit
V
Deo
Chairman
&
Managing
Director
vinit@posiview.in
/
+91
89757
61062
202,
Chintamani
Pride,
Near
City
Pride,
Kothrud,
Pune
–
411038
www.posiview.in