#Budget2014 & Real estate industry
As a follow up to my article pre-budget, this is the first reaction @ 1600 Hrs on 10th July’ 2014, after speaking to friends from the industry.
The Real estate industry is largely welcoming of this budget, for clear directions by the FM on three critical components for the industry.
Recovery & growth of general economic conditions – The FM has shared reasonable steps that would be initiated over the next 2-3 years, in continuity, for the stabilization of the fiscal deficit, and the incremental fund flow into the economy, through incremental economic activity, job creation & resource allocation to priority sectors. The industry has not been taxed additionally & has been recognized for its role in nation building. The investments into new cities, the Urban renewal mission, the infrastructure thrust etc. would create opportunities for the real estate industry to monetize its expertise. The revival of the SEZs also encourage investments by both the developers as well as the occupants of these large format manufacturing hubs, which encourage creation of habitats & recreational facilities around these hubs.
Liberalised fund flow – The FM’s encouragement towards the introduction of REITs, a variant of the REIT for encouraging foreign investors (including NRIs) to invest into infrastructure funds etc. is welcome. The banking sector would not be burdened as much to sustain the pace of development, and that there would be opportunities on the ‘shared risk’ basis between non banking institutional investors, state govts. & civic bodies & developers. With incremental fund flow, and a clear direction to the multiple authorities to play facilitator through faster clearances, the industry looks for incremental cash flows & faster pace of development.
More money in the hands of the buyers – Although the Income tax exemptions to the buyers haven’t been per expectations, a boost has been rendered by the FM by the policy initiatives towards low cost housing, higher incentives for younger generation to invest early into long term savings, including real estate, would assist in boosting the sentiment, and gradually pick the offtake of housing stock. With corporate India planning their long term expansion with the stable tax regime, commercial real estate also would see traction over the next 12-18 months period.
The industry well understands that the building blocks laid in this budget would form the pillars from the next budget onwards, which is just about 8 months away. The only apprehension being the seriousness of implementation of the time bound process to fast track the operational processes.