Mumbai: India’s realty firms, recovering from a slump that saw prices drop 25-30%, hope tax sops are extended to boost construction of affordable homes, but eye more benefits from an anticipated push to infrastructure and easier income tax regime, players and analysts said.
“We will be watching the Budget on what it offers to incentivise low-cost or mid-income housing,” Lodha Developers managing director Abhisheck Lodha said, adding that tax holidays should be extended by at least 3 years.
Brokerages Anand Rathi, HSBC and IIFL all expect the Budget to be largely neutral for the real estate industry.
“Surprises could come in the form of increasing priority-sector housing loans to Rs3 million from Rs2 million now,” Anand Rathi said in a note.
In the last eight months, lower prices and cheaper bank loans have spurred home sales, but an interest rate hike could dampen sentiment, said DLF Group executive director Rajeev Talwar.
Despite a string of government efforts to ease concerns, rising prices are posing a big challenge for the government, particularly high food prices, and they may prompt the central bank to raise interest rates even before April.
Most realty firms such as DLF, Unitech, Parsvnath Developers and Omaxe have reported improved revenues on better home sales in the last two quarters.
The BSE real estate index rose 20.22% from July to December 2009, much in line with the main index, which rose 20.5%. This year till the close of 18 February, the BSE real estate index fell 14.36%, while the main index was down 6.5%.
Developers get income tax benefits under section 80-IB on housing projects with small houses (upto 1,000 square feet in metros and 1,500 sqaure feet in non-metros) that have to be completed within four years of obtaining approvals. The section introduced in 1998 and was extended many times and as of now approvals cleared in 2008 are eligible and developers want to extend that to 2012, Lalit Kumar Jain, vice president of industry body Confederation of Real Estate Developers Associations of India (CREDAI), said.
Rohtas Goel, chairman of Omaxe and president of industry body National Real Estate Development Council, is demanding a grace period of one year for projects that are to be completed by March 2010 as construction had slowed due to the economic slowdown.
“If this (extension) is not done, many builders will get stuck as they have already booked a large part of revenue and profit on these projects,” he said.