posiview insight - budget 2014 - 15
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POSIVIEWINSIGHT
The Economic Survey 2013-14 which came out on 9th July 2014, made some interes�ng -
and what can be called truly unprecedented - observa�ons about the Real Estate Sector. Let
me draw you a�en�on to the Top 5:
Every rupee invested in housing and construc�on adds 78 paise to the Na�onal Income. As compared to 2007 (base year), the prices of residen�al proper�es during the period
2007- 2013 have witnessed increases in 24 out of the major 26 ci�es in India with the
maximum increase in Chennai (230 per cent) followed by Pune (135 per cent), Bhopal
(123 per cent), and Mumbai (122 per cent). Nearly 30 per cent of the country's popula�on lives in ci�es and urban areas and this
figure is projected to reach 50 per cent by 2030. The present urban housing shortage is 1.9 Crore units of which 96 per cent is in
economically weaker sec�ons (EWS) / low income group (LIG) segments and requires
huge financial investment. A very cri�cal observa�on made by the Survey is that from 2005 - 12 the labor force in
agriculture sector declines by 3.6 crs and that in Construc�on increased by 2.5 Crs which
means that people at the low end of the income bracket are looking at this Industry as a
source of their livelihood.
Although some of the above might be common knowledge, the fact that they have been
acknowledged by the Government of India in black and white for the first �me suggests that
this Government's heart in the right place when it comes to this sensi�ve sector.
Despite this huge poten�al as a Sector, India ranked 182nd in terms of construc�on permits,
requiring a total of 35 procedures to get permits as compared to an average of 16 in South
Asia according to the World Bank's Doing Business 2014.
The Finance Minister seems to have taken note of this observa�ons at the Economic Survey
and made several direct and indirect provisions in the Budget for this sector from
employment, investment genera�on and social point of view. We have put together a Bird's
Eye View of the Budget and what it holds for the Real Estate Sector for your ready reference.
A wholesome growth of this sector will also act as a big driver to push GDP growth rate from
the 5% at present to the targeted 10% .”
Vinit Vyankatesh Deo, Chairman and Managing Director, Posiview Consul�ng Partners
Impact of Union Budget 2014-15 on the Real Estate Sector
Incentive to Buyers
Tax Structure for REITs ra�onalised. Adequate REITs will cut pressure on exis�ng bank lending.
Na�onal Housing Banking program; to set aside Rs. 8,000 crore for the program for Rural Housing
To encourage development of Smart Ci�es, which will also provide habita�on for the neo-middle class, requirement
of the built up area and capital condi�ons for FDI are being reduced from 50,000 sq m to 20,000 sq m and from USD 10 million to USD 5 million respec�vely
To approve Goods & Services Tax by end of year.
Proposed to strengthen authority on Advance Tax Rulings.
Financing to Real Estate Sector
To spend Rs 7,060 crore for 100 smart ci�es, as satellite towns of larger ci�es and by modernizing the
exis�ng mid-sized ci�es.
A program of Urban Renewal to be launched; It will address drinking water, use of recycled water, solid
waste management, digital connec�vity to create 500 good quality habitats of interna�onal standards.
Announced development of Metro rails in PPP mode for ci�es with more than 20 lakh people; Rs. 100
crore set aside for metro scheme in Ahmedabad and Lucknow.
Slum redevelopment to be included in Corporate Social Responsibility ac�vi�es
Proposed financing facility of Rs. 50,000 crore for urban infrastructure projects.
Urban Development
Tax Reforms
Raised 80C investment cap to Rs 2 lakh from Rs. 1.5 Lakhs which includes repayment of housing loan.
Hike in housing interest rate deduc�on limit to Rs 2 Lakh
Income tax exemp�on hiked by Rs 50,000 to Rs. 2.5 lakh.
These tax deduc�ons would mean that a person can get an addi�onal deduc�on of Rs 1.50 lacs in his taxable income which means a saving of Rs 45,000 pa or Rs 3750 pm in monthly outgo at the highest slab rate. This can increase his housing budget by Rs. 4 Lakh which is a 25-33% increase for the affordable segment houses in the range of Rs 20-25 Lacs.
Government's decision to not implement the Direct Tax Code in its present draconian form and push to implement the GST by year will take India to a new era of the tax payer friendly administra�on and result in be�er compliance.
This comprehensive package will give a new lease of life to the Ci�es which are suffering due to crumbling infrastructure and thus give boost to the Real Estate sector
This will improve liquidity in the sector and will open new avenues of financing.
Mission for low cost housing proposed to incen�vize development of low cost housing; Rs.4000 crore
announced.
Projects which commit at least 30 per cent of the total project cost for low cost affordable housing will be
exempted from minimum built up area and capitaliza�on requirements, of Foreign Direct investment (FDI)
Affordable Housing
Aiming at total Sanita�on for all households by 2019.
To provide Rs 500 crore to boost rural Power infrastructure
Rs. 3,600 crore set aside for Na�onal Rural Drinking Water Program.
To set aside Rs. 14,389 crore for rural roads improving access to the rural areas
Rural Fund corpus will be raised to Rs. 30,000 crore in FY-15.
Rural Development
Effec�ve steps to be taken to revive SEZs.
Announced Rs. 200 crore for 6 more tex�le clusters in Rae Bareily, Lucknow, Surat, Bhagalpur
Proposed an alloca�on of Rs. 5,000 crore for the fund for the year 2014-15 for urgent need for
scien�fic warehousing.
Ini�al corpus of Rs. 100 crore for development of Industrial Corridors for the smart ci�es
Industrial Real Estate
The new Government's thrust on reviving manufacturing growth as a key driver of na�onal economy will also create opportuni�es for Real Estate developers to enter the Industrial Development Segment
The Government's target to revive the rural economy will lead to balanced growth and relieve the pressure of migra�on to the ci�es.
The tax benefits combined with the opening of the sector completely for Foreign Direct Investment should see significant ac�vity in this space in the coming year especially in view of the shortage of almost 1.8 cr houses as per the Economic Survey.
The budget has allocated a total of Rs 37,880 crores towards the NHAI for the construc�on of the
highways, and an addi�onal Rs. 3,000 crores to boost road connec�vity in the North East. It has targeted comple�on of 8,500 Kms of Na�onal Highways.
The development of 16 new ports has been proposed at the outlay of Rs. 11,000 crore.
Long term loans for Infrastructure projects without restric�ons like CRR, SLR/ priority sector lending
norms.
Infrastructure Development
Infrastructure development is a catalyst to Real Estate development.
Who we are
Posiview Consul�ng is a real estate focused investment banking and strategic business advisory set up
concentra�ng on helping emerging real estate brands to realize their true growth poten�al.
What we do
Posiview Consul�ng aspires to help their client partners to grow their real estate business through
integrated and customized financial solu�ons and advisory. Our ability to hand hold our partners from
evalua�ng the feasibility of each opportunity to determining the valua�on and investment structure to deal
closure enables us to create success in the most complex of situa�ons.
Why Posiview
We are an investment banking and strategic business advisory focused on real estate. Our deep-rooted
understanding of the financial and real estate scenario in India enables us to deliver a customized solu�on
for each of our client partners. Our strong rela�onships in the financial sector, deep-rooted bonds with our
clients' business, and the ability to develop innova�ve and impac�ul financial solu�ons sets us apart to
becoming your growth partner.
35We have been growth partners for more than
projects across cities; since our establishment 4
and delivered financial solutions for projects
covering more than 1.6 Cr Sq Ft
with a market value of
close to INR 5000 Cr
YOUR TRUSTED PARTNERS IN GROWTH
Start a conversa�on to know how you can harnessthe full poten�al of the sunrise Real Estate sector
Vinit Deo ([email protected]) | Kailash Mundada ([email protected]) | Rohit Agarwal ([email protected])
202, Chintamani Pride Bldg, Near City Pride Mul�plex, Kothrud-Pune, 411038 | Ph : +91 20 60300202
www.posiview.in