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India Property
Union Budget FY12: Focus on affordable housing; mid
cap real estate to benefit
• Union budget for FY12 has laid out some key initiatives on affordable
housing front. Introduction of new tax benefits and expansion of some
existing schemes are the key measures taken. These include–
1. Investment linked tax benefits for affordable housing
projects – It has been proposed to bring affordable housing
projects under the ambit of Sec 35AD from FY13 onwards. This is
an investment linked tax deduction benefit which should help
lower tax rates for these projects. However there is no clarity on
the definition of what constitutes “affordable housing” and the
definition of the same has been left to center/ respective state
governments.
2. Liberalization of 1% interest subvention scheme by
enhancing the housing loan limit to Rs1.5M (vs. 1.0M earlier)
subject to house value under Rs2.5M (vs. Rs2MM earlier).
3. Priority lending home loan limits raised to Rs2.5M from Rs
2M which brings more suburban houses under its purview.
Focus on these affordable housing projects in general is a positive
for mid cap real estate developers (APIL/ Parsv/ Oaxe) which have
a higher focus on this segment vs. the bigger players. Specifically
UT/ HDIL have some exposure via Unihomes/ Virar development,
though we estimate the accretion to value here should be no more
than 5-10%.
Other significant measures proposed:
4. New SEZs to start paying MAT FY13 onwards (inline
with Direct tax code) – The budget proposal to bring the SEZ
developers under MAT ambit (18.5% MAT tax rate) from FY13
onwards is essentially in line with the revised DTC code. Tax
exemptions would continue to be available to SEZ developers/units
notified before FY12 and MAT will be levied on the new
SEZ/units (incremental in nature). Further, it is proposed to tax the
dividends distributed by the SEZ projects from Jun-11 onwards (as
against DDT exemption earlier). This can push up cap rates by 50-
100bps on SEZs
5. Hotels – Service tax of 5% has been proposed on all the
hotels with an ARR of over Rs1,000 per night. Service tax is a pass
on to the customers and we don’t see any meaningful impact on
our estimates for IH on account of this.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Property
Union Budget FY12: Focus on affordable housing; mid
cap real estate to benefit
• Union budget for FY12 has laid out some key initiatives on affordable
housing front. Introduction of new tax benefits and expansion of some
existing schemes are the key measures taken. These include–
1. Investment linked tax benefits for affordable housing
projects – It has been proposed to bring affordable housing
projects under the ambit of Sec 35AD from FY13 onwards. This is
an investment linked tax deduction benefit which should help
lower tax rates for these projects. However there is no clarity on
the definition of what constitutes “affordable housing” and the
definition of the same has been left to center/ respective state
governments.
2. Liberalization of 1% interest subvention scheme by
enhancing the housing loan limit to Rs1.5M (vs. 1.0M earlier)
subject to house value under Rs2.5M (vs. Rs2MM earlier).
3. Priority lending home loan limits raised to Rs2.5M from Rs
2M which brings more suburban houses under its purview.
Focus on these affordable housing projects in general is a positive
for mid cap real estate developers (APIL/ Parsv/ Oaxe) which have
a higher focus on this segment vs. the bigger players. Specifically
UT/ HDIL have some exposure via Unihomes/ Virar development,
though we estimate the accretion to value here should be no more
than 5-10%.
Other significant measures proposed:
4. New SEZs to start paying MAT FY13 onwards (inline
with Direct tax code) – The budget proposal to bring the SEZ
developers under MAT ambit (18.5% MAT tax rate) from FY13
onwards is essentially in line with the revised DTC code. Tax
exemptions would continue to be available to SEZ developers/units
notified before FY12 and MAT will be levied on the new
SEZ/units (incremental in nature). Further, it is proposed to tax the
dividends distributed by the SEZ projects from Jun-11 onwards (as
against DDT exemption earlier). This can push up cap rates by 50-
100bps on SEZs
5. Hotels – Service tax of 5% has been proposed on all the
hotels with an ARR of over Rs1,000 per night. Service tax is a pass
on to the customers and we don’t see any meaningful impact on
our estimates for IH on account of this.
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