The Budget is relying heavily on maintaining the trajectory of growth in the economy to provide solutions for inclusive growth that touch the ‘Aam Aadmi’ and parallelly stressing on governance aspects, which hopefully will be covered separately through concrete action plans to deal with the menace of unaccounted wealth. The trend for consolidation is expected to continue. Fiscal deficit is expected to be within the targeted limit, thanks to the spectrum bounty and buoyancy in tax revenues. The direction for fiscal consolidation has been set. Fiscal deficit is targeted at 3.5% by 2013-14.
A major initiative towards inclusive growth that stands out is the proposal for direct transfer of cash subsidy to people below the poverty line. This is a bold step which if properly implemented would prevent leakages in the system and benefit the common man significantly.
The Budget is neutral on fresh tax mobilization and to that extent it will help in containing inflation.
Real Estate is expected to be impacted as follows from the relevant provisions:
Positives
- 1% interest subvention for housing sector loans: Limit has been increased to cover housing loan of Rs.15 lacs from Rs.10 lacs capturing house value of Rs.25 lacs from Rs.20 lacs. During the last one year the prices of residential real estate has increased by 10-20% across several cities. This enhanced limit for interest subvention will ensure continued benefit to the buyers of this particular segment.
- Priority sector lending: Housing loans limit raised to Rs.25 lacs from Rs.20 lacs. Increase in this limit is in line with the increase in the property price. Priority sector tag to house loan up to Rs.25 lacs will ensure credit flow at relatively cheaper interest rate to this segment.
- Mortgage Guarantee Fund for housing loans to Low Income Group (LIG) and Economically Weaker Section (EWS). Banks and financial institutions were reluctant to lend to LIG and EWS segment on account of poor repayment capability. However, this provision will provide the required safety cushion to financial institutions which provide home loans to this segment resulting in higher fund flow to this segment.
- Rural Housing Fund allocation of Rs.3000 crores. This will provide the much needed impetus for the growth of housing in the rural centers.
- Investment linked deduction to businesses developing affordable housing. Including affordable housing projects under section 35AD is a welcome move as this will provide an incentive to the developers of these projects.
- Allocation to Infrastructure and higher outlay for rural centers. This will have a multiplier impact on the rural economy and hence will boost demand for rural housing.
Negative
- Minimum Alternate Tax (MAT) on SEZ Developers is advanced by one year. While it was to be implemented under Direct Tax Code from 1st April 2012, the advancement of this tax by one year will be a dampener for developers of SEZ. This will increase the skepticism in the minds of SEZ developers about the future tax benefits of developing an SEZ.
Despite being a positive budget, from a real estate perspective, the urban middle income housing consumers who have been reeling under the pressure of spiraling prices seems to have been left out of any meaningful benefit.
