Budget-2010-Impact on Real Estate

 

Real Estate sector which is slowly coming out of the Mid 2008 slump,
has received good support from Union Budget 2010-11.

While the budget has encouraged affordable housing below
Rs 20 lakhs with 1% interest subvention for housing loan
upto 10 lakhs and extension of  benefits available under
section 80IB by one more year, extension of some services
are extended so as to bring under service tax impacting
the industry in difficult times.

However the industry which asked for industry status
for township projects,


changes in tax deduction on housing loans relaxation of
ECB route to fund projects etc has been overlooked.

Budget provisions

Extended the interest subvention scheme of 1% on all
individual housing loans upto Rs 10 lakh for units costing
upto Rs 20 lakh till March 30, 2011.

Housing projects which are eligible for
benefits U/s 80IB(10) as being approved after
1st April 2005 and before 31st March 2008 by
 respective local bodies will now be allowed to
be completed in five years instead of earlier
4 years from the date of sanction.

The definition of ‘Construction of complex service’
is being clarified/ scope extended that unless the entire
 consideration for the property is paid after the completion
of construction (i.e. after receipt of completion certificate
 from the competent authority), the activity of construction
 would be deemed to be a taxable service provided by the
builder/promoter/developer to the prospective buyer and
the service tax would be charged accordingly.

Definition of ‘Renting of immovable property service’
 as far as service tax is amended to  (i) provide explicitly
 that the activity of ‘renting’ itself is a taxable service.

The change has been given retrospective effect from 01.06.2007.
Similarly the rent of vacant land where there is an agreement or
contract between the lessor and lessee for undertaking construction
of buildings or structures on such land for furtherance of business
or commerce during the tenure of the lease will now be levied service tax.

Excise duty on cement (produced by non mini cement plants)is
increased to Rs 290/ tonne (from Rs 230/ tonne) if retail sale
price is not exceeding Rs 190 for 50/ kg bag or Rs 3800/ tonne
or 10% of retial sale price (from 8%) for cement if retail sale
price exceeding Rs 190 per Rs 50 kg bag or Rs 3800/ tonne.

In case of cement sold other than packaged form 10% or Rs 290 per
tonne which ever is higher compared to 8% or Rs 230/ tonne.

Excise duty on steel, PVC pipes, ceramic tiles increased from 8% to 10%.

The surcharge on corporate tax has been reduced from 10% to 7.5%
while MAT has been hiked from 15% to 18%.  This should benefit
many real estate companies, as most of them are outside the
purview of MAT, but will benefit from effective reduction in corporate tax.

Impact analysis

While the hike in excise duty on cement, steel and other inputs
 will pinch the industry at a time when the demand is on slow
recovery path, as the industry could not afford to pass on the
 same to the homebuyer.

However the industry players who have got their 80IB (10) eligible
projects delayed can take comfort with the time for completion being
 extended to 5 year from current 4 years. Moreover interest subvention
scheme of 1% on all individual housing loans upto Rs 10 lakh (Rs 1 million)
 for units costing upto Rs 20 lakh (Rs 2 million) till March 30, 2011
 is a positive move to encourage affordable housing units costing upto Rs 20 lakhs.

Since real estate sector is more interest sensitive this 1% subvention
 will reduce the EMI significantly and improves affordability.

Further more and more developers will conceive projects in this
 price segment to tap the potential auguring well for the sector
on a whole. However the impact of bringing rental of vacant land
into service tax as well as other changes in service tax has to be seen.

Since the demand for real estate being a derived one,
the growth thrust as well as more money on middle class
individual will benefit the industry by way of demand pickup .

Budget-2010:Buying under construction flat will attract service tax on payment made before completion of construction

 

Mar 3, 2010

The Budget proposals have thrown up a dampener

for the housing industry.

Construction services have now been brought

under the ambit of the service tax in an unexpected

move that would raise cost of apartments that are

still under construction.

As per the Budget proposal, the finance ministry

has suggested that construction would be deemed

to be a taxable service if the building or complex is

still under construction and approval from the

concerned regulatory authority — which in most

cases is the resident municipal authority — hasn’t

yet been granted. The levy would cover all

construction of complex service or commercial or

industrial construction services, the Finance Bill suggested.

The service tax levy would be 10.3% and would also

apply to additional services such as those offering

preferential locations for flats in multi-storey buildings

where flats in each floor are priced at a premium due

to their location. This too has been described as a

service and hence taxable, according to the proposal

which was tabled in Parliament on Friday

by finance minister Pranab Mukherjee.

The premium is typically levied on categories such as

flats or apartments that are above a certain floor rise

or have other high value locations such as being in front

of a garden or a sea or any other preferred locality.

“The proposal is to tax construction if the entire payment

for the flat is made before completion of construction,”

said consulting firm RSM Astute executive director K H Viswanathan.

“This would increase the cost of the apartment and may discourage

potential buyers.” The service tax would be 10% on 33% of the price

of the apartment, while on the remaining 67%, tax won’t be levied.

Till now, for all apartments under construction, customers

paid in instalments based on plinth level construction and also

on the progress in building activity. Banks too lent money to

the customers according to the requirement of the builder.

Now most developers would ask customers to pay the entire

value of the building if they sought to lock in at a certain value.

This would mean paying the entire sum before the construction.

Typically, in cities such as Mumbai, where there is a pressure

on space and hence apartments and flats are much sought after,

customers booking for flats in an under-construction building, is very common.

“The service tax and excise duty hike on cement would increase the

overall cost of apartment by about 10%,” said Dharmesh Jain,

managing director of Nirmal Lifestyles, a Mumbai-based developer.

“It’s a negative step and we are considering to meet the finance

minister to plead for a relook on this measure,” he added.

But there are other positive measures that the Budget proposes

such as allowing pending projects to be completed within a period of 5 years

instead of 4 years, for claiming deduction of profits, as one time interim relief.

There is also a suggestion that the commercial area included in a housing

project would now be 3% of the aggregate built-up area of the housing

project or 5,000 sq. ft, whichever is higher, compared to the existing limit

of 2% and 2,000 sq.ft. respectively. This would help developers

and real estate companies to make their projects more viable.

Budget ‘10 : Relief to Housing Projects & Hotel / Convention Centre

1 March 2010

Relief to Housing Projects

100% deduction on profits from a housing project is available if the project is completed within 4 years from the end of the financial year in which approval from local authority is obtained. This period is proposed to be increased to 5 years.

Further, the current norm for maximum build area for 

each unit is enhanced from 5% of total build up area or 

2,000 sq ft to 3% of total built-up area or 5,000 sq ft,

whichever is higher. This will be effective from Ay 2010-11 onwards

Relief to Hotel / Convention Centre pending 

for completion in National Capital Territory

Deduction to a Hotel / convention centre in National Capital 

Territory is available if it starts functioning on or before 

March 31, 2010. In light of the fact that the Commonwealth 

Games shall be held in October 2010, it is proposed that 

thededuction shall be available even if the hotel / convention centre 

starts functioning before July 31, 2010.

Deductor and collector will continue to issue TDS/TCS certificate

even after April 1, 2010.

Budget-2010:Positive, growth-oriented Budget say realtors

 February 28, 2010 –

Most market segments have welcomed the union Budget 2010. 

Markets and the indices showed their appeasement by jumping to higher points.

As the reactions to Budget start pouring in, 

we bring you quick bytes from the industry leaders.

Anuj Puri, Chairman & Country head, 

Jones Lang LaSalle Meghraj:

“The positive revision in personal income tax rates will

put more money in the pockets of the middle class, 

thereby increasing the buying power and sentiments 

of home buyers. Coupled with the extension

of the 1% interest subvention for affordable housing, 

this clearly is a sign that the residential sector will 

continue to thrive.

We would have been even more grateful for the re-introduction

of the 80 IB (10) tax benefit scheme, first implemented in 2001, 

which was definitely a boost for developers of affordable housing.

Nevertheless, the fact that existing incentives continue to be in place is positive.

The increase in allocation for slum redevelopment to Rs 1,270 crore 

will ensure that key areas in city centres will begin to yield quality

real estate supply. This is of critical importance when it comes to

giving form and logic to the urban landscape in congested cities like Mumbai.”

Union Budget 2010 – Highlights

Pradeep Jain, Chairman, Parsvnath Developers Limited:

“The budget is good for all public in general and for infrastructure

sector, food processing units and the large support to the rural 

development including PPP projects, education and health etc. 

But the developers have looked forward to more sops to bring

housing affordable for all the sectors of the society, however,

we welcome Finance Minister’s move of provision of Rs 700 crore

and extension of interest subvention scheme of 1% on all individual 

housing loans upto Rs 10 lakh for units costing upto Rs 20 lakh

till March 30, 2011.

The scheme recognizes that cut in interest rates has an important

role to play in reducing EMIs of borrowers & creating additional

demand for low cost housing. We are of the view that it will encourage

and prompt the developers to give more importance to projects which

will cost upto Rs 20 lakh. However, it would have been more fruitful for

the buyers and developers had the limit been increased from units

costing  upto Rs 20 lakh to units costing upto Rs 30 lakh.”

Mr. RK Arora, Chairman & Managing Director, Supertech Limited.
The budget, this year has both positive and negative aspects for the

real estate developers as well as the buyers. There is a revision in

personal income tax slabs, which will strengthen the purchasing

power of the buyers affecting the demand of the residential sector. 

The common man will also be benefited by the continued subsidy 

of 1% for affordable housing loans, which will help this sector to grow. 

On the other hand, a 2% increase in Excise Duty of cement and steel 

might not prove profitable for the real estate developers as the cost 

of construction would be expensive which will ultimately result in the

increased cost of the project and hence the buyers will be affected. 

Also, it would have been a great support to the real estate sector 

if Section 80I (B) would have been renewed to thrive the

demand of affordable housing.

Mr Kabul Chawla, MD - BPTP Ltd.
Commenting on the Budget announced by the Finance
Ministry today, Mr Kabul Chawla, MD, BPTP Ltd, the leading real estate
player, has said that the budget is stable for over all economic development.
We welcome finance ministry announcement of Sops for real estate,

housing projects extended by a year and one-time interim relief provided 

to the housing & real sector projects. . Norms for built up area for shops

in residential projects have also been changed to benefit residents
Thus, overall the budget will contribute to infrastructure

development across the country.


Mr.Navin M Raheja , Managing Director, Raheja Developers Limited
“The budget presented by the Finance Minister is good for the Indian

economy. We appreciate the decision of Finance Minister to continue

the stimulus package. The budget is focused on the overall infrastructural 

development of the country including the rural sector.

But the Finance Minister has not considered the real estate 

sector’s major recommendations such as status of infrastructure 

to the industry, extension of tax exemption/tax rebate under 

section 80 IB up to March 2011, ECB for real estate etc. 

This would have helped the country to focus on meeting 

the housing shortage in the country as well as improving 

the overall GDP of the country.

Further, we had recommended that the central support under

Rajiv Awaas Yogna should be passed to the party who is

executing the project under PPP instead of passing the

benefits to the state Government/agency which has also

not been considered.”


Mr. Rohit Raj Modi, Spokesperson, Raj Nagar Extn; (NH-58) Developers Association
The budget has been a well balanced keeping in view the fiscal

deficit. The clarity on GST, DTC rollout is welcome. 

On the housing front, we welcome the extension of 

completion time by 1 year for the projects under section 80IB,

however, the extension should be for at least 2 years in the view

of delay in projects completion due to slow down in 2008 and

partly 2009. It was also expected that the 80IB scheme be revived 

so that the mandate of affordable housing could be taken up in right

earnest by the private sector. We welcome the extension of the 

subvention of 1% on loan amounts below 20 lacs.

However it is not enough, the government needs

to up this limit to 30 lacs.

Disha Direct Announces the Launch of First City – the First Integrated Township in MIHAN, Nagpur

 

The sprawling world class integrated residential township
that endeavours blending nature with state-of-the-art lifestyle
will feature 11 impressive 13 storied residential towers spread across 31 acres.

– Homes at First City are being offered at an
unmatched price starting from just Rs. 23.13 Lacs.
 
India’s leading real estate marketing company
Disha Direct has announced the launch of First City,
the first residential project in MIHAN
(Multi Modal Integrated Hub Airport at Nagpur), 
developed in a specially allocated residential zone.

A first of its kind Lifestyle Product, First City is a
sprawling world class integrated residential township
that endeavours blending nature with a high-quality lifestyle.
Spread across 31 acres, First City comprises 11 impressive
13 storied residential towers.

The name First City has many firsts to its credit: the
first residential project in Nagpur; the first project in
Nagpur to have high rise towers; the first project to use
MIVAN Forming Systems Construction Technology in
Nagpur to ensure high speed, homogenous construction;
and, the first project in Nagpur to have a podium across
the entire project to ensure 1:1 parking of one four-wheeler
and one two-wheeler for every flat.

First City presents a wide array of 1542 luxurious apartments
(1 to 5 BHK including Duplex apartments). Every home is
designed intelligently, imbibing the most important elements
of aesthetic architecture. With optimum utilisation of space
and crafted with elegance, the apartments have been planned
imaginatively to suit the tastes of a style-admiring populace.

First City is backed by MIHAN’s world class infrastructure
of roads, water supply and electric supply. MIHAN has a
200MV captive power plant to ensure uninterrupted power
supply to the entire SEZ, Logistics Zone and the Residential
Zone within MIHAN. A state-of-the-art water treatment and
distribution plant in MIHAN inspired by the Singapore model
will ensure uninterrupted water supply after purification and softening.
The infrastructure is at a very advanced stage of
implementation and will be commissioned in the next few months.
Equipped with sophisticated telecommunication, good quality
roads and a cable infrastructure,
First City epitomises the modern cityscape
of a rapidly-transforming Nagpur.

The other amenities of First City include a 40000 sq.ft. ready
club house, two magnificent swimming pools, a well equipped
gym, spa and special zone for indoor games, multi cuisine
restaurant, multi purpose hall and a spacious play area for children.

Developed by Reatox Builders & Developers Pvt. Ltd and
marketed by Disha Direct, homes at First City are being
offered at an unmatched price starting from Rs. 23.13 Lacs and above.

The period of possession is scheduled within a short span
of 30 months. The project development is progressing
with complete precision which will enable fast completion
of the township. Investors in this project are expected to
move into their new homes on time.

Providing an interesting insight on deciding to develop
First City in MIHAN; Atul Shirodkar,
Chairman & Managing Director of Reatox Builders &
Developers Pvt. Ltd, says,
“By developing First City we are not just emphasising
on the residential aspect of MIHAN but we also
wish to focus on its magnificence of being located in
over a 4000 hectare plus area.

The sole intention behind designing this project
was to make people aware that Nagpur as a city
holds immense potential for growth.

If there had to be a good beginning, I believe
First City is just the first brick of that beginning.”

A. Shyamsunder, CEO of Disha Direct seconds Atul’s
thoughts by adding, “We have immense faith in Nagpur.

After Mumbai, the official Orange city of India promises
to emerge as a technological and logistics hub which
will transform the commercial viability of Nagpur and
result in a huge number of jobs being created, thus fueling
the demand for housing. This is the first ever residential
township to take shape within the sprawling limits of MIHAN.
We therefore foresee an automatic escalation in the
value this project holds in the very near future.”

Nagpur, a city located in the heart of India and also
referred to as the Zero Mile city, stands poised to be
redefined with a future of International class.

Having catapulted to Tier II status from a Tier III city,
Nagpur is in the centre of major developments envisaged to
transform this second capital of Maharashtra into a lifestyle destination.

Adding uniqueness to Nagpur is the most ambitious
governmental project of MIHAN spread over an area
of 4354 hectares.

MIHAN is divided into two major parts:
an International Airport to serve as a cargo hub
and a Special Economic Zone (SEZ) with a residential
zone on the southern end of Nagpur adjoining the
present airport. MIHAN is being developed by MADC
(Maharashtra Airport Development Company Ltd.) whose
Chairman is the Chief Minister of Maharashtra.

First City presents property investors a great opportunity
to be the ‘first citizens’ of a New Nagpur in a New Era.

About Disha Direct:

 firstcity-nagpur.in/projectprogress.htm
Disha Direct is a leading real estate marketing organisation.
It offers services across the entire spectrum of real estate –
be it residential properties in cities and towns,
2nd homes away from the city, plots of developed land,
commercial properties, expansive acres of land or some rare
charismatic homes and investment opportunities.

Well-equipped with a team of over 200 professionals,
7 brands, 10 offices, 1 International Office in New York,
1 Real Estate Expert Advisory, 23 completed projects,
20 ongoing projects, 9 upcoming projects and 5000 happy customers;

Disha Direct is not just a conglomerate but a philosophy etched in
the minds of many.