Budget 2012: Realty players say Budget gives them a much-needed breather

The realty industry on Friday welcomed the move in Budget to allow external commercial borrowings (ECBs) in the low-cost housing segment, which was one of the long pending demands of the developers, saying it will give fillip to the already struggling sector.

"The move to allow ECBs for low-cost housing projects is commendable as it will give a fillip to the sector, which was reeling under financial shortage," Jones Lang Lasalle Infia Chairman and Country Head Anuj Puri said.

There is a shortage of 26.3 million housing units in the country and this move will help in creating more housing stock, he added.

The Finance Minister has also proposed reduction in the withholding tax on ECB interest from 20 to 5 per cent.

The Budget announced a slew of other initiatives for the sector, including setting up of credit guarantee trust fund to ensure better flow of institutional credit for housing loans, enhancing provisions under Rural Housing Fund from Rs 3,000 crore to Rs 4,000 crore, extending the scheme of interest subvention of 1 per cent on housing loan up to Rs 15 lakh, where the cost of the house does not exceed Rs 25 lakh, for another year and enhancing the limit of indirect finance under the priority sector lending from Rs 5 to Rs 10 lakh.

"The extension of interest subvention scheme and increase in provision under rural housing fund are likely to boost the demand for rural and affordable urban housing. Further, reduction in the withholding tax on ECB interest would help the sector in assessing cheaper funding," Icra Rating Senior Vice-President Rohit Inamdar said.

The industry, however, raised concerns over the hike in service tax from 10 per cent to 12 per cent, saying it is likely to lead to rise in property prices.

"The increase in the service tax would lead to additional burden on the tenants as the service tax on rentals has remained unchanged. Further, it will push up the realty prices as the additional cost will be passed on to the buyers," Cushman & Wakefield India Managing Director Anurag Mathur said.

The industry expressed disappointment over FDI not being allowed in retail.

"There has been a decline in the supply of retail real estate over the last few years. We were expecting the Government to allow FDI in retail after permitting ECB in housing. FDI in retail would have given a fillip to the overall real estate sector," Puri said.

The sector welcomed hike in spending on infrastructure saying it would create more housing stock.

"Measures to increase funding for highways and other infrastructure is a welcome step but we hope to see much towards urban infrastructure to support the real estate industry. The development of road network by NHAI and DMIC will open up more land parcel for development of housing in the periphery," Omkar Realtors Director Gaurav Gupta said.