Proposal to free up capital will come as a boon for real estate industry

Proposal to free up capital will come as a boon for real estate industry
The Financial Express – Corporate Impact Section II, Page 1

fe Bureaus

Following the announcement by the finance minister to raise Rs 1,00,000 crore for the development of the infrastructure sector by Infrastructure Finance Company (IIFCL) in Budget 2009-10, construction players feel that this is an indirect boom to the real estate sector as taking out finances will help free up capital in infrastructure. Meanwhile, top real estate developers are unhappy as they expected this year’s Budget to be aggressive and investment-led for the low and middle-income housing in metros and rural housing which was not addressed.

According to the new amendment in the Budget, a developer cannot sell more than one unit to the same person or his family. This is going to come into effect from April 1, 2010. The government had tightened the regulations for Section 80 IB to avoid its misuse. Under the section, developers get total tax concession for residential units of 1,000 sq ft in bigger cities and 1,500 sq ft in smaller ones.

Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj, said, “Allocation for Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has been substantially increased. This is good news for urban infrastructure in general. JNNURM has been instrumental in proving road and rail connectivity in urban and suburban areas, and this will give a significant boost to mass housing schemes on the fringes of the metros.”

Meanwhile, announcement of infrastructure investment to exceed 9% of GDP by 2014 has been welcomed. However, Navin Raheja, managing director, Raheja Developers, said that the government’s efforts to implement JNNURM will not be workable as the allied services and activities are not supportive, such as availability of funds at cheaper rates, fiscal incentives such as restoration of Section 80 I B and treating integrated townships which has at least 25% of low cost housing units as infrastructure projects. The government has also not taken steps towards increasing disposable income such as enhancement of limits under Section 80 C and 24.

The finance minister has also stated that manufacturers of prefabricated concrete slabs will now have a tax relief and that goods made at construction sites now have their exemption reinstated. Puri added, “This spells good news for developers of lower income housing segment, who depend largely on low construction costs. Also, the fact that allocation for the National Highways Authority of India has been increased will mean improved and accelerated connectivity.

Industry players feel that the increase of funding for the Commonwealth Games will vastly enhance development potential in the Delhi NCR region and have direct positive implications for the hotel industry in this sector.