Union Budget Special-2010

Don't you forget about me this time!

The 2009 Budget quite surprisingly had very few proposals that directly benefited the real estate sector, though the sky had tumbled upon it leaving it worse off than most other sectors at that time. Industry leaders are hopeful that this time round, the Finance Minister will be more responsive to their needs.

The last two years have been a rough ride primarily due to the decline in demand, the supply excesses, and the high debt position of most Indian developers. The fiscal stimulus provided by the Government did help the sector achieve better liquidity levels, but did little to improve retail demand. It is therefore essential that the sector continues to receive support so it can move quicker towards recovery.

The Government would do well to re-introduce the tax holiday available for low-cost housing that had lapsed in March, 2008. Besides stimulating retail demand, low cost housing also helps the government meet its objective of providing quality housing to the population at large. Since margins in this segment are lower than say the mid and luxury housing, the re-introduction of the said tax holiday will provide a shot in the arm.

Though some recovery in residential demand is visible, industry watchers have been lamenting about the lack of recovery in commercial real estate demand. The abolition of service tax on commercial real estate would be a welcome relief. The tax office has been enforcing the collection of service tax on rentals while judicial precedent has been pointing in a different direction leading to mixed signals and consequent litigation. A legislative amendment would come in handy.

Increase in exemption limit for interest payment and on loan repayments for personal taxation would be a tremendous stimulant to retail demand. Industry leaders though hopeful, acknowledge that this is bit of a wishful thinking given the fiscal tightrope that the government is trying to walk!