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India Equity Research Reports, IPO and Stock News
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Real Estate: Nothing much to cheer NEUTRAL
SEZ developers down on the MAT
It has been clarified that developers and occupants of Special Economic Zones (SEZ)
will be taxed at the Minimum Alternate Tax (MAT), which currently stands at 18.5%
(18% last year) compared with full exemption for a period of ten years earlier. The move
will result in an increase in cap rates of SEZ properties, bringing them more or less in
line with IT Parks (approximately 10%+ from 9%). The most affected in our universe is
DLF, which generates approximately 13% of GAV from SEZs. It is also likely to result in
a spate of SEZ de-notifications and developers are likely to try to return land banks to
state governments (where possible) and ask for project refunds (if any).
Home loan sops targeting the LIG
The budget announced two key home-loan measures: 1) New home loans up to
INR2.5m (previously INR2m) will qualify under priority sector lending; 2) interest rate
subvention of 1% on loans less than INR1.5m (earlier INR1m). If we assume an
average LTV ratio of 70%, the value of homes that will qualify for such special loans
(under priority sector lending) should not exceed INR3.6m. Very few listed developers
target the budget housing segment and include HDIL (HDIL IN, HOLD), Unitech (UT IN,
HOLD) and Puravankara (PVKP IN, Not rated).
Increase in personal disposable income minimal
Unlike the previous budget, which saw a good jump in personal disposable income, this
year the increase in annual disposable income is only INR2,000.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Real Estate: Nothing much to cheer NEUTRAL
SEZ developers down on the MAT
It has been clarified that developers and occupants of Special Economic Zones (SEZ)
will be taxed at the Minimum Alternate Tax (MAT), which currently stands at 18.5%
(18% last year) compared with full exemption for a period of ten years earlier. The move
will result in an increase in cap rates of SEZ properties, bringing them more or less in
line with IT Parks (approximately 10%+ from 9%). The most affected in our universe is
DLF, which generates approximately 13% of GAV from SEZs. It is also likely to result in
a spate of SEZ de-notifications and developers are likely to try to return land banks to
state governments (where possible) and ask for project refunds (if any).
Home loan sops targeting the LIG
The budget announced two key home-loan measures: 1) New home loans up to
INR2.5m (previously INR2m) will qualify under priority sector lending; 2) interest rate
subvention of 1% on loans less than INR1.5m (earlier INR1m). If we assume an
average LTV ratio of 70%, the value of homes that will qualify for such special loans
(under priority sector lending) should not exceed INR3.6m. Very few listed developers
target the budget housing segment and include HDIL (HDIL IN, HOLD), Unitech (UT IN,
HOLD) and Puravankara (PVKP IN, Not rated).
Increase in personal disposable income minimal
Unlike the previous budget, which saw a good jump in personal disposable income, this
year the increase in annual disposable income is only INR2,000.
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