Budget 2015 at a glance for realty sector

Real Estate sector views the budget laid down by Finance Minister Arun Jaitley on 28th

Feb 2015 with

mixed feelings. While the pre-budget expectations from the new government were soaring high, not

much has been announced to directly provide impetus to the real estate sector. Various key people in

the industry has different views about the same.

M R Jaishankar, CMD, Brigade Group, said “It is a good growth oriented budget, with special emphasis

on infrastructure, Swacch Bharat, introduction of pension schemes, curbing black money & improving

ease of doing business. But as far as Housing industry is concerned, there is no special encouragement

inspite of ‘Housing for All’ vision. To that extent for our industry, the budget is disappointing.”

However Mr. Shrinivas Rao, CEO-Asia Pacific, Vestia termed the budget to be growth oriented and

remarked that “Budget 2015-16 has taken many positive initiatives to boost the Indian economy by

empowering the individual State economies and creating ample scope for employment generation.

Proposing to overhaul capital gains taxes to make way for the listing of Real Estate Investment Trusts

(REITs) is a vital step forward for the setting up REITs in the country. Meanwhile, the increase in

infrastructure investments by INR 700 billion in 2015-16 will open up vast opportunities for Real Estate

Sector and positively impact its growth. A prudent and progressive budget!”

Meenakshi Khurana, Managing Director, Smart Homes said that “The budget has not been as expected

on the real estate front. However the finance minister’s statement about Housing for all by 2022 shall

ensure much needed momentum and growth in this sector. Also the fund allocation to the tune of

22,407 crores towards housing development and 70,000 crores towards development of infrastructure

is a clear indication that the government’s emphasis on development of realty sector shall stay put.”

PR Swarup, director general, CIDC stated that “The biggest disappointment probably was the exclusion

of the plan for ‘100 smart cities’ in the country. The budget has not talked about 100 smart cities.

Further, hike in service tax would erode the purchasing power of the average consumer”

As per Suresh Hari, Secretary, CREDAI Bengaluru, “The Budget is exciting and needs to be studied in

depth. But overall there is a clear approach on infrastructure and growth. As far as the realty sector is

concerned the following announcement encourages and helps the sector. Skill Mission enhancement,

which will bring in enhanced skilled work force.”

Let us have a glance at the key developments and announcement on the real estate and infrastructure

front in Budget 2015-16:-

• Emphasis has been laid on “Housing for all by 2022”. A fund allocation of Rs. 22,407 crores has

been done towards housing development with plans to create 2 crore urban housing and 4 crore

rural housing units to fulfil this vision. This should enable minimizing the current prevailing gap

of demand and supply in this sector.

• Rs. 70,000 crores has been allocated towards infrastructural development including

development of rail, road and agriculture. This in turn shall provide better connectivity and

momentum to real estate sector.

• Budget proposes to rationalize capital gains regime for REITs and InvITs. With this more

investments from REIT for rental, commercial and other properties should become a reality.

• Allocation of Rs. 4,173 crores has been done for water resources in India.

• As a positive move to curb black money within the sector “Benami Transaction Bill” has been

introduced in the sector. Acceptance of any cash deal above an amount of Rs. 20,000 has been

strictly prohibited in the sector.

• As another positive step, the budget emphasizes on implementation of Goods and Service Tax

(GST) by April 2016.

• Swachch Bharat Abhyan has been an important agenda of the new government. To give it

further boost necessary fund shall be allocated towards construction of 6 crore toilets under this

mission.

• The DMIC corridor project has further been assigned a sum of Rs. 1200 crores for the

development of Ahmedabad-Mumbai industrial corridor. A further increase in allocation shall be

done through the year as the activities on the DMIC corridor project gains speed.

• A proposal has been made to increase the service tax from the current rate of 12.36% to 14%.

This shall make homes more expensive for the buyers and the real estate services availed by

them shall also incur higher costs.

• Efforts shall be made towards revitalizing and realigning the Public Private Partnership model

which shall directly boost real estate sector.

• Tax free bonds shall be introduced for infrastructure of rail, roads, etc. This in addition to budget

fund allocation shall help in raising low cost debt funds towards infrastructural development in

the country.

Be it a positive budget or a non-impactful one on realty terms, one thing is evident – The budget is

definitely a growth oriented one and the government is all set to provide the nation the much needed

thrust in terms of economic upliftment.

About: Smart Homes is a professionally managed young organization that specializes in

affordable Group Housing and Town Planning Projects in India and plans to build more than

100,000 homes in next decade. Smart Homes has a Team that has over 200 man years of

experience in development of apartments in group housing projects and the team has the

experience of selling more than 80 million square feet of housing projects across India.