BUDGET 2013-14: Impact on Real Estate Industry

‘Realty sector of any country is capable of uplifting country’s economy’

Real Estate Industry has gained an altogether new status in past few years. The industry has seen major ups & downs in the last few years. Allowing FDI in 2002 was a major turning point for the Industry. Though, last year has been challenging for Realty sector but, this year is predicted to be a mixed bag of opportunities.

To buy a house and keep it forever is typically an old story. Now, people want to invest in property as they see investing in Property a safe and a high return solution in comparison to stocks or mutual funds.High Interest rates, low economic growth are the prime reasons behind a fall of 12-13 percent in the absorption rate by the customers. Due to this slow down, the Builders were launching fewer projects in the market.

Not only the Realty sector but also the investors were hoping a lot from the Union Budget 2013. The demand of Real Estate Industry was to lower the interest rates on loans and simplify the process of approvals and increase the process transparency.

Finally on 28^th of February, Mr. Chidambaram announced his 8^th Union Budget. He announced to start an Urban Housing Fund to match up the huge shortage of houses in the urban areas. Mr. Chidambaram quoted in his speech that, “I propose to ask National Housing Bank to set up the Urban Housing Fund and, in consultation with RBI, I propose to provide Rs. 2,000 crore to the Fund in 2013-14”. To boost up the sector further, another clause has been added for the first-time home buyers. The first-time investors availing up to Rs 25 lakh in 2013-14 can get an additional interest deduction of Rs 1 lakh in the first year above the existing 1.5 lakh benefit.

Apart from this, the allocation towards the Rural Housing Fund has been increased to 50%. For the luxury and premium apartments the abatement in service tax has been reduced to 70% from 75%. This would result in an increase of about 0.6% in effective service tax rate. The Budget for 2013-14 also proposed to levy a one per cent TDS on properties of above Rs. 50 lakh.

The Impact of Budget 2013-14 is neutral providing a little encouragement to the market. This Budget is expected to bring liquidity for the urban housing and thus increasing the demand in the industry.

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