In the past few months, sluggish demand and tight liquidity conditions have played havoc with the real estate sector. Developers have been forced to offer large discounts, which in turn has caused profit margins to deteriorate. The sector, therefore, had high expectations that the Union Budget would have provisions that would provide a stimulus to the sector and help revive it. In the event, the Budget has proved to be a disappointment. While the government did announce an increase in expenditure on rural housing and housing for the poor, it did not offer any benefit to home buyers or to real estate developers.

DASHED EXPECTATIONS

One positive measure in the Budget for the salaried class was the raising of exemption limits on income tax. However, according to Anuj Puri, country head of real estate consultancy Jones Lang Lasalle Meghraj (JLLM), “The increase in exemption limits is not sufficient to make a significant difference in buyers’ purchasing power.”One measure that could have boosted the demand for housing was increase in tax exemption on housing loans — on principal and interest repayment. It was widely anticipated that the current exemption limit of Rs 1.5 lakh on interest repayment would be hiked to Rs 2.5 lakh. “We are disappointed that this did not happen,” says Puri.

Further, the Budget had nothing to say on opening up the real estate sector further to foreign direct investment (FDI), nor did it mention any steps regarding operationalising Real Estate Investment Trusts (REITs) and Real Estate Mutual Funds (REMFs).

... contd.