Real Estate Sector

Real Estate:

* Existing scheme of interest subvention of 1 per cent on housing loans further liberalized. Existing housing loan limit enhanced to Rs 25 lakh for dwelling units under priority sector lending

* Provision under rural housing fund enhanced to Rs 3000 crore

* SEZ Developers bought under the MAT

Budget Impact

Real Estate has witnessed a tough time on all the fronts in the past two years. Be it the rising interest rates, falling volumes, higher debt burdens and last but not the least alleged involvement of housing loan companies in a scam. The sector was battered in all ways. So much was expected from the budget on the funding options front. But the budget appears to be mixed bag for the realty sector. The move to increase the priority housing loan limit to Rs 25 lakh is a positive one that will lead to increasing the base of home loan takers and thereby provide a boost for affordable housing. The government has liberalized the scheme of interest subversion of 1 per cent on home loan by including loans up to 15 lakh for houses that cost up to Rs 25 lakh. Interest subvention scheme on housing loans is extended by one year. This move aims at providing a boost to affordable housing and low cost housing. But again, it will be beneficial for the companies in affordable housing and that too in the Tier II and Tier III cities. We feel it is quite difficult to find affordable housing in the metro cities. But again companies like Puravankara, HDIL and Omaxe are expected to benefit from this.

The proposal to increase rural housing fund to Rs 3,000 crore from Rs 2,000 crore will lead to development in the rural areas and small cities.

On the budget Mr. Ramesh Sanghvi - Director, Sanghvi Group stated that “The budget of 2011-12 has certainly given due importance to the affordable sector. The current scheme of interest subvention on 1 percent on housing loans is now extended to Rs 15 lakhs where the cost should not exceed 25 lakh”. He further added “The increase in the rural housing fund to Rs 3000 crore from Rs 2000 crore will offer several opportunities for real estate development in rural areas”.

But some SEZ developers like DLF and Marg Constructions are expected to get impacted as SEZ developers are now brought under the minimum alternate tax net. So over all the budget has been a mixed bag for the realty companies. The sector has been battered severely in the past and the small help from budget is not expected to provide any help.