The Indian Budget 2014-2015 has given a fresh lease of life to the cash strapped real estate sector with its announcements. It has fulfilled a long pending demand of developers on easing guidelines for allowing foreign direct investment (FDI) in real estate.
The Budget has proposed reducing the minimum built-up area requirement in FDI funded real estate projects to 20,000 square meters from 50,000 square meters. It has also proposed reducing the minimum paid up capital requirement of wholly owned subsidiaries of foreign partners to $5 million from $10 million at present. “This measure will help service demand from a funding perspective,” says Neeraj Bansal, partner and head of real estate and constructions, KPMG India.
Representational Image. ReutersRepresentational Image. Reuters
Home buyers have some reasons to cheer. The Budget has proposed an increase in housing loan rebate from Rs 1.5 lakh to Rs 2 lakh, which is expected to give a savings of Rs 5,150 to individuals annually and Rs 5,665 for the super rich, according to KPMG.
It has allocated Rs 8,000 crore for rural housing and Rs 4,000 crore for affordable housing through the National Housing Bank, a state owned bank and regulation authority to provide cheaper credit to buyers of low cost homes in urban areas. “The government will however have to create a strong awareness among buyers about the availability of this credit facility,” says KPMG’s Bansal. The Budget has also included slum re-development as part of corporate social responsibility, which will boost participation of private developers in slum re-development.
Not everyone is happy with the Budget though. Shyam Sunder Pani, president and founder, GIREM, a national think tank that works with local government and supervisory agencies in the areas of infrastructure planning, sustainable growth and development believes the Budget allocation of Rs 7,060 crore for building 100 smart cities is very low. “You need Rs 6,000 crore per city to put in place basic socio-economic infrastructure to serve a population of 1 million. Unless the government tops up this corpus significantly in the mid-term, this will end up being a half hearted attempt to creating new cities.”
The Finance minister’s Budget announcement of reviving Special Economic Zones hasn’t been received well either. “The Budget was silent on the long term industry demand for removal of MAT (Minimum Alternate Tax), which could have provided a major boost to investment in the manufacturing sector. The Budget should have outlined a roadmap on revving up the investor confidence in SEZ,” said GIREM’s Pani.
Realty stocks have shown a thumbs up to the Budget, with the BSE Realty index rising by around 7 percent. The index consists of 13 realty stocks including India’s largest developer by market value, DLF Ltd. DLF’s stock has gone up by as much as 25 percent.

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