Google+ Pune Property: July 2014

Sunday, 13 July 2014

Annual Budget 2014 : Best cities , FDI easing to drive real-estate sector

The NDA Govt recently declared a slew of measures to spur the Real-estate sector , among them an allocation of Rs 7 ,060 crore for the growth and development of 100 smart cities , a decrease in the size of projects qualified for FDI from 50 ,000 sq metres to 20 ,000 sqm and halving the minimal investment limit for FDI to $5 million .
Announcing his Budget proposals , finance minister Arun Jaitley said he has also allocated Rs 4 ,000 crore to affordable housing for the urban poor through the National Housing Bank ( NHB ) and plans to extend incentives for real estate loans. Slum improvement has been made part of industrial CSR activities.

The Govt will even provide the necessary benefits for real-estate investment trusts (REITS) which will have a pass-through for the purposes of taxation in effect avoiding two times taxation, Mr Jaitley said.

Giving a definitive direction to the new govt and PM Narendra Modi's plan of constructing smart cities across the country , Jaitley allocated Rs 7 ,060 crore in the budget for developing 100 smart cities , redeveloping satellite towns of largest cities as well as other small cities.

"The opening up of FDI will bring in opportunities for low priced capital for smaller projects as well, increasing quality and delivery of low price and affordable housing projects," said Getambar Anand, managing director of ATS Infrastructure and also the president of the Confederation of Real Estate Developers Association of India (Credai).

At the moment a huge number of projects are not eligible to foreign direct investment because they do not fulfil the minimum threshold conditions. This has meant only big projects, usually on the higher side of the budget range, are able to attract attention from foreign private equity funds.

Since it is election to office, the government has articulated it is idea to provide real estate for all by 2022 for which it wants to sponsor the private sector. Based on the housing ministry, there is a shortage of around 18 .78 million houses in the country of which 96% is in the financially weaker and low salary segments. This move to relax FDI limit will help improve the development of low-cost and cheap housing furthering the government's imagination.

"Relaxation of FDI limit in real estate improvement under the automatic path is a clear road map for inviting investment funds. Relaxation of limit for lowest investments is an invitation to smaller players and higher NRI investment," said Amit Bhagat, leader of Ask Property Investment Advisors, which invests in housing projects.

"The decrease in built-up area and size of projects will allow mid-sized and smaller project developers with good track records better access to FDI and improve affordable housing in the country," said Surbhi Arora associate director, research at property advisory company Colliers International.

REITS too are wanted to provide succor to several liquidity starved real-estate companies that currently have a high level of debts on their books. While the suggestions for REITS were introduced earlier by SEBI, what was missing was the clarity on taxation for the framework because of which not organization has yet taken a call on it.