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Budget 2013 - Real Estate

Tuesday 19 March 2013

Time to get the dream house you always wanted!

With the proposed additional tax break for properties costing up to Rs. 40 lakhs with a loan component of up to Rs. 25 lakhs, first time home buyers bring cheers to real estate companies engaged in residential housing and to prospective home buyers, positively impacting the real estate sector in 2013.

The Union Budget has also allocated additional funds of Rs. 60 bn to the Rural Housing fund for FY14 as against Rs. 40 bn last year. These funds are used to refinance lending institutions that extend loans for rural housing. The Budget has also proposed to set up Urban Housing fund for Rs. 20 bn for FY14 to provide funds for urban housing. Added to this, the allocation for Indira Awaas Yojana has also been fixed at Rs. 152 bn resulting in a positive impetus for low cost housing projects.

The positive impact of the Budget is neutralized with the proposed TDS of 1% on large property transactions above INR 50L that will be charged on the transfer of immovable property and the proposed increase in Excise duty on marbles from its current levels of Rs 30 per sq meter to Rs 60 per sq meter, increasing the overall cost of construction. This in turn may be passed on to the end consumers, thus making luxury homes upward of Rs 1Cr extremely expensive for customers.

So who wins this year?

Home loans are set to be attractive and the added impetus on low cost housing would see proud many first homeowners in FY13. However, the proposed TDS is expected to strain budgets and impact real estate developers adversely. Project Funding is expected to still be a challenge continues to be a challenge for developers as the Union Budget 2013 has not accorded an industry status for the RE sector.

On the other hand, capital allocation to projects such as JNNURM scheme will positively impact the real estate sector. Coupled with the expected progress on various industrial corridors, there will be an increase in demand for both commercial and residential real estate.

Want the stalwart of the industry analyze the budget for you? Click here.

Looking to invest in the Real Estate sector? Click here to open an account with Kotak Securities.

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