Budget 2011: More could have been done for realty

The finance minister’s thrust on giving the lower income bracket housing loans up to Rs15 lakh with an interest benefit of 1% from the present Rs10 lakh will certainly create more demand.

But in metropolitan cities like Mumbai and New Delhi, where real estate prices have escalated exponentially in the last one year, the demand for affordable housing is much higher, whereas these home loans would only benefit people in the distant suburbs.

As SEZs come under the purview of the minimum alternate tax (MAT), developers would find it difficult to get occupants for the same. Also, the increase in MAT to 18.5% from 18% will hurt further. The budget remained silent on the extension of the STPI exemption. A lot of developments across the country, which is almost 50% of ready IT park office space of over 25 million sq ft, may actually lead to a jump in bad loans and stress for developers.

There have been challenges on land aggregation and a lack of clarity on SEZs. This would impact manufacturing companies several of whom were planning to invest huge sums in these SEZs. These taxes would only act as an additional burden and erode the cost benefit which was kept in mind while building them.

CREDAI, the country’s apex real estate body, had given its recommendations to bring back section 80 IB(10) of the Income Tax Act which had been withdrawn.

The Act allowed four years for construction of projects sanctioned before March 31, 2008 and it should have been enforced more rigorously by making some amendments to the Act to support the ailing sector.

The government needs to take steps to increase the supply in the market, which can only come through land reforms, the right kind of regulation, increased funding for low cost or affordable housing, other such incentives and infrastructure development.

There is an imminent need for increase in floor area ratio (FAR/FSI), to make land cheaper and to give clearances to projects on a war-footing and to roll out cheaper home loans which would bring huge volumes in the market and these things would help in reducing realty prices. I believe more could have been done and should be done.

Due to the increase in the bandwidth in priority lending to Rs25 lakh from Rs20 lakh there would be a spurt in realty prices in the short term which would directly hit consumers but if the policy is continued for a longer duration it would calm prices.

Also, the concessions being granted to developers who are building townships it is necessary to point that acquiring 100 acres is a mammoth task thus the land acquisition limit should be curbed and a single window clearance put in place.

Sanjay Dutt is CEO-Business, Jones Lang LaSalle India