Tier II, III towns to benefit more from Budget: CBRE

February 27, 2010

Anshuman Magazine, chairman & managing director, CB Richard Ellis, South Asia Pvt Ltd

Real Estate got a mention in this year’s budget unlike last year where it was largely ignored. The finance minister provided one time interim relief by allowing a one year extension to housing development projects to claim deduction on profits.

The scheme of 1 per cent interest subvention on housing loans up to Rs 10 lakh for a house costing not more than Rs 20 lakh has been extended by one more year and an additional Rs 700 crore have been allocated to the scheme. The allocation to Housing & Poverty Alleviation has been raised to Rs 1,000 crore. The significant increase in allocation of funds by 75 per cent to Rs 5,400 crore for urban development is a welcome move. The finance minister also announced increased allocation of Rs 10,000 crore for Indira Awas Yojana -- a popular rural housing scheme. These positive measures will encourage demand, especially in the tier II & tier III cities and towns.

The Rajiv Awas Yojana scheme for extending support to states that are willing to provide property rights to slum developers got a substantial incremental allocation of Rs 1270 crore. This is in line with the government’s announcement of making India slum free and is certainly a step in the right direction.

I am pleased that infrastructure got its due attention especially getting 46 per cent of the total planned allocation of the budget. Schemes such as Bharat Nirman, The Backward Region Grant Fund, increased allocation by 13 per cent on road transport, railways, the Delhi Mumbai Industrial Corridor project, etc., will give an impetus to infrastructure development in the country.

However many demands of the industry were not addressed such as relaxing of ECB norms for real estate development, differential home loan rates, allowing higher deduction of interest on home loans under section 24 of the Income Tax act, exemption from service tax on renting immovable property and most importantly giving industry status to the real estate sector. The finance minister also remained silent on granting an extension to the STPI scheme beyond 2011.

On the infrastructure fund, the finance minister has delivered by allocating the capital and now the Government needs to deliver on implementation of infrastructure projects with a sense of urgency as so far the Government’s track record has not been up to the mark. “Overall the budget is positive but could have been more bold.”