Real-estate pins hopes on the Budget ::Business Line,

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Developers are keen that the Government considers the concerns of both realtors and end-users.

With the Union Budget for 2012-13 in the offing, the real estate sector is hoping for announcements that will benefit the sector. The sector, which has gone through a tough business cycle impacted by a prolonged slowdown that hit sales volumes and the overall prices, has begun to find its feet again.

The real estate sector players are keen that the Government considers the concerns of both the realtors and the end-users, so that the sector gains further momentum.

An interaction with a cross-section of developers based in Hyderabad shows that they all want the tax exemption limit to be hiked, and the interest rate for housing lowered, possibly treating buyers up to Rs 25 lakh to lower interest rates.

BUOYANT MARKET

The Managing Director of luxury home developer Koncept Ambience, Mr M. P. Agrawall, said that the real estate sector, which is part of the larger construction sector, is amongst the largest employers, with a big cascading impact on some other sectors like steel and cement. Unfortunately, real estate is also heavily taxed, with nearly 27 per cent going towards duties, taxes and registration.

“Any tax relief will only help the buyer, as it will bring down the overall cost of acquisition,” Mr Agrawall explained.

Referring to the market situation, Mr Agrawall said the market in Hyderabad during the past few months, compared to last year, has been quite buoyant, with the Telangana stir issue becoming less prominent. Developers are gradually increasing the prices after they had bottomed out. The prices have gone up by Rs 300-500 per square foot, in line with input costs.

“The demand-supply situation is fine now. The oversupply situation may not hold good for too long, as builders delayed taking up new projects. This means, during the next six months or so, we may see a situation where there isn't enough supply,” Mr Agrawall felt.

The President of Andhra Pradesh Real Estate Developers Association, Mr Prem Kumar, said issues relating to IT ceiling increase and lowering of interest rates are being actively debated within the sector, as these two could play a role in acceleration of the market and also playing on buyers' sentiment.

GOVERNMENT ORDER

But in Hyderabad, a Government Order was passed a few quarters ago, for projects of one acre and above, to reserve a part of the land for lower-income group housing onsite. This has held up several project launches. The Government sources have indicated that this is likely to be tweaked a little to encourage project developers, says Mr Prem Kumar, speaking on behalf of the real estate association.

The General Manager of Ramky Estates & Farms Ltd., Mr D. R. Patnaik, said “The interest regime needs to soften from the highs we have seen during the last few quarters. Even a 0.5 per cent drop in rates has a major impact on the mind of a prospective buyer. From a high of approximately 10.5 per cent, it needs to come down.”

There are two options that the Government could consider. One is the increase in exemption limit for borrowers when it comes to Income Tax payments, the other is treating buyers in the housing segment below the Rs 25 lakh category with lower interest rates, Mr Patnaik said.

ACTUAL USERS

Mr Agrawall maintained that the “actual users” market has revived. They also know that the prices have bottomed out so much so that the only change they are likely to see is that the prices going up in future.

In fact, rates in some of the smaller cities in the State are now on par with Hyderabad in the peripheral areas.

He also felt that some speculation is good for the market, as it creates more interest in going beyond end-users.

In pre-budget expectations, Mr Pranab Datta, Vice-Chairman and Managing Director of Knight Frank India, told Business Line that in the last budget, the Government had announced a tax rebate under 80CCF for investments in infrastructure bonds.

This helped NHAI, REC and some others to raise funds from the public for infrastructure investments. Hopefully, this tempo will continue.

The Budget should continue to focus on other such fiscal incentives to increase spend on infrastructure.

What the country needs is a long-term perspective plan which factors growth during, say, the next two decades or so.

If the Government is keen that the country sees a growth of 9-10 per cent, developing infrastructure, of which real estate is a major component, is vital.

“To address this, we need to develop infrastructure and support by creating projects that bring in FDI, whose flow had come down lately,” Mr Datta said.