UNION BUDGET 2014- 15..
ITS IMPACT ON THE
PROPERTY
SECTOR
An article from Our Building
& Construction August 2014
by Dr.D.Sivaprakasam,
M.Com., M.Phil.,
B.G.L., PGDCA., Ph.D.,
Principal,Dr.R.A.N.M.Arts
and Science College, Erode
ECONOMIC
CIRCUMSTANCES..
The Union Budget
2014-2015 was presented in Parliament under economic circumstances that
required tax revenues to
keep pace with targets.
Considering the
state of Government finances and the current situation - below normal monsoons,
Middle East tension leading oil price
volatility, the weakness of the India rupee etc., there was not much room for
populism.
BOOST
TO HOUSING SECTOR..
However, the
Budget is a boost to the Housing Sector. In terms of relief to the housing
sector, the budget has allocated
Rs.4000 crore for low-cost housing schemes. Apart from this, The Union Budget
has also indicated that
there will soon be relaxation of FDI norms for the affordable housing sector.
Though the Government has
announced such incentives for lowcost housing in the past, the real task lies
in the fast execution of
these initiatives. It is very positive that the Government has taken due note
of the demand- supply mismatch in the
LIG and EWS housing segments, and it remains to be seen how fast these
initiatives hit the ground in real time.
INCOME
TAX RELIEF..
Significantly,
the budget has increased the income tax deduction limits under 80C, of which
the repayment of principal on
housing loans is a component. This limit has been raised from Rs.1 lakh to
Rs.1.5 lakh. Additionally, the budget has also
increased the deduction limit on interest payment for housing loans from Rs.1.5
lakh to Rs.2 lakh.
These two
factors alone will lead to a vastly improved sentiment on the housing markets.
 |
| Dr.D.Sivaprakasam, Erode |
INDIRECT
BENEFITS..
This budget gave
further indirect benefits for the residential sector by increasing the
individual income tax exemption limit from Rs.2
lakh to Rs.2.5 lakh. This will increase disposable income of individuals and
would have further
implications on their ability to service home loans.
CONSTRUCTION
COSTS...
Construction
costs have been rising at the rate of 17 percent over the last three to four
years, and this budget has not provided
enough measures to bring down these costs. Contrary to expectation, material
costs involved in real estate construction will remain high
over the near-to-medium term, which is bound to put pressure on developers’ margins.
INFRASTRUCTURE
DEVELOPMENT..
The
infrastructure and manufacturing sectors have been given paramount importance
in this budget,
since these are
job creating verticals. Banks will now be encouraged to extend long-term loans
for infrastructure projects without
any regulatory pre-emptions such as CRR, SLR and priority sector lending norms.
This additional
enforcement of banks to support the creation of infrastructure will result in
faster infrastructure creation and the consequent benefits to the real estate
sector.
ROAD
CONNECTIVITY
The budget has
allocated a total of Rs.37,880crore towards the NHAI for the construction of
highways and additional
Rs.3000 crore to boost road connectivity in the North-East regions. For the
current year, it has targeted
the completion of 8,500 kilometers of national highways, which are a known real
estate catalyst and
will have long-reaching implications on the markets of the cities they connect.
Ahmedabad and
Lucknow have been singled out as special beneficiaries of this budget with the
allocation of Rs.100 crore towards
the deployment of Metro rail systems in these cities. This increased
connectivity will raise the scope of
real estate development and also have an impact of property valuations over the
mid to long term.
PORT
PROJECTS..
The development
of 16 new ports has been proposed at an outlay of Rs.11,000crore. Additionally,
an allocation of
Rs.11,600crore has been made for the development of outer harbour port
projects. The combined effect
of these provisions will be that there will be an increase in demand for
commercial office space from the
manufacturing sector in India’s major port
cities.
SMART
CITIES..
As promised in
the new Government’s manifesto, it has proposed the
creation of 100 smart cities across India. The budget has
allocated Rs.7,060crore towards this end, thereby giving a financial sign-off
for this concept.
This will have
very positive implications for real estate across all segments, namely
residential, commercial, retail and hospitality.
Smart cities imply considerable demand for technology-enabled services and this
is a big positive for IT
/ ITeS companies in India. Significantly, as much as one-third of the country’s demand for office space emanates
from this sector.
RETAIL
SECTOR..
The country’s warehousing sector has received a
boost with an allocation of Rs.5,000crores, In this, there are positive
implications for the retail real estate sector on account of a strengthened
supply chain, which has been a serious requirement of this sector for a very
long time. Apart from
this, the budget has not provided any further benefits to the retail sector,
which is a disappointment.
STEPS TAKEN BY
TAMILNADU GOVERNMENT
URBANISATION
For TamilNadu,
the Chief Minister unveiled new housing and infrastructure projects at a cost
of over Rs.1000 crore
mainly for Chennai on 15th July, 2014.
The Projects
include a 222 acre self-sufficient habitation at Kadambur near Maraimalai
Nagar, reconstruction of 534 Slum
Clearance Board flats at Nochikuppam and
10,000 flats in
Chennai and other cities.
According to the
Chief Minister, these projects were necessary to keep pace with
urbanization and to meet the requirements of ever-increasing population.
SLUM-FREE
CITY SCHEME Under
the slum-free city scheme implemented jointly
by the State
Government and the Centre, 10,000 flats in multi-storey buildings would be
constructed in Chennai and other cities
in the first phase.
The project cost
is Rs.825 crore and 50 per cent of the funds would come
from the Centre
and 40 per cent from the State Government.
The
beneficiaries would bear just 10 per cent of the construction cost. The area of
every flat was increased to 397 sq feet
last year and now it would further be increased to 400 sq feet.Besides ceiling
fans and electric lights, the flats would get all the basic amenities including
streetlights, drinking water supply, sewage canals and other social
infrastructure.
NEW
FLATS
The
Government has decided to construct 534 new
flats in
Nochikuppam in the place of old flats which were now in a bad shape.These flats
were constructed in 1972 by the Slum
Clearance Board and the occupants had requested the Chief Minister to construct
new buildings.
The cost of this
project is Rs.48.06 crore.Each flat would be 400 sqft and would have a
multi-purpose hall, a kitchen, a bedroom, a
toilet and a balcony.
The construction
work would begin after obtaining permission from the Chennai
Metropolitan Development Authority(CMDA) and the Light House Authority (LHA)
and would strictly
adhere to the
rules of the Coastal Regulation Zone (CRZ).
The houses would
be given to the existing allottees and extended families would get
accommodation at OkkiamThoraipakkam.
In Kadambur
village near Maraimalai Nagar, the Government would convert the existing 58
acre lake as a water source for the new habitation.People from all income
groups would get allocation here.
NEW
OFFICE FOR CMDA
According to the
Chief Minister,the new multi-storey building planned at Koyambedu would
accommodate the CMDA and
other Government offices. The building would have 3 basements, a stilt floor
and 8 floors covering over 1.9 lakh sq
feet and the investment for the project is Rs.63.25 crore.
POSITIVE
IMPACT
Though the real
estate sector’s expectations have not been met
completely in the Union Budget, no doubt this budget will be a boost to the
property sector. The steps taken by the
Central Government and the State Government will produce a positive impact on
the property sector.
The property
sector is once again headed in the right direction.
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