Description
IN THIS PROJECT YOU WILL FIND ABOUT THE BUDGET AND COMMON MAN,
Budget 2013: What the common man wants
By Jayant Jain and Khyati Shah
Wed Feb 20, 2013 10:03am IST
Just as a farmer gazes into the sky each year waiting for the onset of the monsoon that would lead to a bumper harvest, the common man has a lot of expectations each time the finance minister rises from his seat to present the budget in parliament.
It's still not clear whether the budget P. Chidambaram unveils on February 28 would be a populist or a responsible one. But here's a look at the common man's wishlist. TAX EXEMPTION With rising inflation hitting pockets hard, raising the tax exemption limit to 300,000 rupees from 200,000 rupees would leave more disposable income in the hands of taxpayers, particularly those in the lower income bracket. INVESTMENT LIMIT The Income-Tax Act provides for a deduction of up to 100,000 rupees for certain investments/expenses such as retirement funds and insurance payments. In the absence of statefunded social security schemes, it is important for people to secure their post-retirement life. Increasing the limit to 300,000 rupees will encourage such investments. Further deductions like Section 80CCF (investing in infrastructure bonds) are also welcome as apart from encouraging savings, they also enable the government to direct the funds to priority sectors. HOUSE LOANS Every Indian dreams of owning a house. But while property prices are soaring, the interest deduction of 150,000 rupees on self-occupied property is too low. The limits should be increased to 500,000 rupees.
HEALTHCARE The rising cost of medical care is hurting the common man. Raising the exemption limits for reimbursement of medical expense to 75,000 rupees from 15,000 rupees should provide some succour. The deduction limit under section 80D for health insurance premiums should also be increased to 50,000 rupees from 15,000 rupees with more and more people opting for health insurance. ALLOWANCES While conveyance and education expenses have surged, the exemption limits haven't kept pace. These limits should be increased in proportion to the amounts spent. STANDARD DEDUCTION Salaried employees incur various expenses for upgrading their skill sets. But they are not allowed deduction of any expenses incurred during employment. A standard deduction up to 30 percent of salary with an upper limit of 75,000 rupees should be provided. ESOPs Employee Stock Ownership Plans (ESOPs) issued free of cost or at concessionary rates are taxed on the difference between fair market value and the amount actually paid by the employee. Levy of income tax on date of exercise creates a liability on the employee to pay tax on gains which are purely notional. Such taxation makes ESOPs less lucrative. Since ESOPs are a critical, motivational and retention tool for companies to retain talent, they should be taxable only on sale of shares. REFUNDS Revenue authorities need to ensure taxpayers get refunds and tax credit on time. This will encourage more Indians to pay tax.
…………………………………………….
E
very year the budget session of parliament heralds in a series of discussion and reports in the media. It is
important for us as citizens to also understand the budget because it has a direct impact on how much money we spend, save and invest over the coming year. This year the focus of the budget is likely to be the ballooning fiscal deficit. Now this may seem like a complicated term but it is not. Let me break this down for you. Siddhart is a young man with a tendency to spend more than he makes. At the end of every month when he runs out of cash and he resorts to borrowing from his friends to make up for the short fall. After several months of this behaviour, his loans have ballooned to a very large portion of his monthly salary.
That means the chances of him being able to pay off all his loans is very slim. His friends will soon realise this and stop lending him money all together. The country's fiscal deficit is much like, Siddhart's finances. When the government spends more than it earns the shortfall is called the fiscal deficit.
India's fiscal deficit during the financial year 2012-13 was 5.3 per cent of the national GDP, much higher than the
initial target of 4.6 per cent. This is not good because it causes nervousness among investors. he ballooning fiscal deficit has lead to several rating agencies, like Standard & Poor and Fitch, threatening to downgrade the country's credit rating to junk status. (The credit rating is an indication of its ability to payback its loans). There are several international pension funds that invest in India, and these funds are prevented by regulation to invest in countries with junk status ratings. If a downgrade happens these pension funds will be forced to pull out all of their money out of the country. When so many foreign investors exit and take their money home, it will have a negative impact on our currency and our economy. A weak rupee will result in high inflation because of the price of oil and petroleum that we import will go up. Long story short, the finance minister's main priority during this year's budget will be to reduce the fiscal deficit. This means he will have to cut his spending and increase his revenues. While as citizens we normally look forward to tax breaks in every budget, but this year's budget announcement may not be as generous.
Here is a list of all the major changes that are expected in the budget this year that will impact our finances.
Higher taxes for the super rich: In an attempt to increase direct tax income for the government the FM could consider imposing a surcharge on taxes for those who have an income above a threshold. Tax experts suggest this threshold may be Rs 22 lakh (Rs 2.2 million) a year and above. Industry associations have warned that such a move may dampen business sentiment and cause more tax evasion. Fresh deadlines for the Direct Tax code: The Direct Tax Code or the DTC is likely to be delayed further. The finance minister may want to take another look at the details of the code that have been modified drastically since he first began working on it. Besides, most governments are hesitant to introduce such drastic changes so close to a general election.
Bigger incentives for equity investments: The finance minister is expected to announce several measures to encourage retail investors to move more of their money into equity. This would help the sentiment in the equity market. The Rajiv Gandhi Equity Savings Scheme (RGESS) that was announced during the budget last year has failed to mobilize investor interest. The FM may modify this scheme to make it more accessible.
The FM is also expected to reduce Securities Transaction Tax (STT) and short term capital gains tax on equity to
boost more investor interest. Carrot and Stick approach to Gold: As Indians we tend to invest our money into gold to keep our capital safe. The spurt in gold imports over the last year has aggravated the current account deficit. The FM has been talking about the need to push savings into financial instruments rather than unproductive assets like gold. So expect higher tax on physical gold purchases and a bigger tax break for long term investments like insurance and pensions. Higher tax breaks for home loans: High interest rates and the high cost of real estate have kept several of us away from our dream homes. In an attempt to make homes more affordable the finance minister is expected to increase the Rs 150,000 interest deduction on housing loan repayment. Some tax experts expect the allowance to be doubled. On a parting note, you should always sit down with your financial planner in the days after the budget is announced to make sure your investment portfolio is taking full advantage of all the new tax breaks and changes made in the budget. While the finance minister will have to focus on maintaining the balance within his accounts, you need to focus on making the most of your money.
…………………………………
Budget 2013-14: Tax-payers pray for higher limits, tax-friendly schemes
While India’s Annual Budget is important to understand the Government’s planned revenue and expenditure, it is equally important to the common man to understand how his finances shape up as a result of this event.
While India’s Annual Budget is important to understand the Government’s planned revenue and expenditure, it is equally important to the common man to understand how his finances shape up as a result of this event. Small Tax Payers are typically the salaried class and small entrepreneurs, who are the first to be hit in case of any negative provision in the Budget.
The salaried class ends up paying all taxes religiously on the back of compulsory deductions by their employer. Therefore, it is but natural that a majority of expectations relate to the tax front. Apart from tax provisions, there are a few other areas where expectations are high from this section of the society. The following are some important expectations of small tax payers from this year’s budget:
Increase in Income Tax initial exemption limit and allowances: The current initial exemption limit of Rs. 2 lakhs is viewed to be low, considering that inflation has continued to remain stubbornly high. It is desired that the Government increases this limit to Rs. 3 lakhs for men assesses and Rs. 3.5 lakhs for women assesses, in order to increase disposable income in the hands of taxpayers. Additionally, allowances like transportation allowances (Rs. 800 per month), education allowance (Rs. 100 per month per child upto 2 children), hostel allowance (Rs. 300 per child upto 2 children) are limits defined in the Income Tax Act years earlier. It is felt that these allowances should also be revised upwards to reflect current price levels.
Reimbursement limit on medical expenses: Currently pegged at Rs. 15000 per annum, it is expected that this limit should also be increased, taking into consideration escalating healthcare costs.
Home Loan Repayment of Principal and Interest: Currently principal repayment of home loan is included under Sec 80C deductions. This section is one of the most used sections by taxpayers, and is mostly fully utilized, without even including the principal amount. Hence the amount deducted towards principal often doesn’t qualify for tax deduction. There is a
wide demand that principal repayment should be included under a separate provision of the Income Tax Act to get additional benefits. Another aspect of home loan is interest repayment. Interest repayment eligible for tax deduction is restricted to Rs. 1.5 lakhs per year, which is deductible under Sec 24(b) of the Income Tax Act. Since real estate prices have sky rocketed over the past few years, interest paid per year far exceeds this limit every year for most home buyers. It is hoped that an increase in this limit will be announced in this year’s Budget.
Increase in investment limit under Sec 80C: Income Tax Act’s most popular section Sec 80C’s limit has been fixed at Rs. 1 lakh for many years now. With the number of investment avenues included under this section being plenty, it is very easy for a person to exhaust this limit in a year, by investing in various eligible instruments. The common man expects that this limit should be increased at least in this year’s budget to a more realistic amount.
Infrastructure bonds inclusion: These bonds, which had tax exemption upto investments worth Rs. 20,000 were removed from the Income Tax purview. It is hoped that this provision is restored in this year’s budget, as the infrastructure sector is also is need of substantial funds for expansion.
Taxation on National Pension Scheme investments: Income from the National Pension Scheme is currently taxed on an EET (Exempt-Exempt-Taxable) system, which means withdrawals are taxed even though contributions and returns to the NPS are not taxed. Changing the status to EEE (Exempt-Exempt-Exempt) system means tax exemption will be available at all three stages - investment, appreciation and withdrawal. This will go a long way in enhancing returns of the retired who have invested in this scheme.
Increasing the exemption limit on interest of savings bank accounts: The interest you earn on savings bank accounts is exempt from tax upto Rs. 10000 per year. If this limit is increased to a higher amount, it will help in reducing tax outflow for those who maintain high balances in Savings accounts.
Launching tax-friendly equity schemes: The Rajiv Gandhi Equity Savings Scheme which was introduced last year provides tax benefits to first time investors in the equity markets. However, this investment is restricted to investors with an annual income of less than Rs.
10 lakhs. Increasing this limit beyond Rs. 10 lakhs and introducing more such schemes will help in benefiting more small tax payers.
The above are a few expectations from the Budget by the small tax payers. With the current high inflation in the economy combined with poor growth, there is a need for the Budget to include provisions which can increase disposable income in the small tax payers’ hands.
……………………………
What to and what not to expect from Budget 2013
Come February and one is flooded with talks and noises concerning the upcoming budget. The exhaustive panel discussions across media, all painting either rosy or bleak scenarios that the country could face, only adds to the confusion in the minds of the common man.
IndiaProperty.com
Come February and one is flooded with talks and noises concerning the upcoming budget. The exhaustive panel discussions across media, all painting either rosy or bleak scenarios that the country could face, only adds to the confusion in the minds of the common man. Sadly for him what he gets as budget updates is a list of sector specific populist wish lists - which most of the times are irrelevant for him.
What we have tried to do in this report is try and provide a concise précis of what this budget could bring to the real estate sector - both for the end user as well as the developer.
Let us start with the oft repeated introduction that almost all the reports start with - the subdued global outlook, the depreciating rupee, talks about "paused" economic reforms. The question that immediately pops up in almost all our minds is - what has that got to do with me having to bear inflated prices of properties?
Let us try and put it in context within the limitations of a "concise précis". The industries and sectors that one should watch out for are Steel, Coal, Power, and Chemicals. Along with the obvious Land, Cement and Manpower cost fluctuations what also affects the prices are seemingly unrelated sectors like the ones listed above.
Why because the real estate sector is one of the least insulated sectors and hence falls prey to the vagaries of global economic scenarios affecting either of these sectors.
Out of all the above Coal is the most important as it is the primary raw material used for Power, Cement as well as Steel Production.
Power because globally 42 percent of power is produced using Coal.
Coal is the core material required for steel as well as cement production. Even Fly Ash, which has become one of the fastest growing raw material segments in the Real Estate sector, is a by-product of Coal Combustion.
Funny how suddenly the budgetary discussions on these sectors become important for all of us looking at owning a house.
With Australia the second largest producer of Coking Coal and the largest exporter to India, it will be obvious now why any budgetary discussions involving unrelated scenarios like say, import concessions, become relevant for the masses.
Now about the impeding budget session, it is a known fact that in India populist budget sessions have always been used as a tool by governments to kick start their election strategies. This budget session is expected to be no different.
With elections round the corner and the draining popularity of the current government, it is highly likely that populist reforms could figure prominently. The Realty Sector can expect buyer friendly reforms to boost the sagging buyer sentiment. What we expect to see is fiscal pressures allowing for a gradual reduction in home loan rates over the year. Also, an increase in tax exemption limit on the interest paid on home loans from current INR 1.5 lakhs is one of the major expectations from this budget.
For the construction industry, in light of its larger inter-dependencies on various sectors and with the need to move away from a subsidy driven culture, their demand for subsidy on construction materials for low and mid segment projects is unlikely to materialize.
The sector getting infrastructure status with tax exemptions and other incentives for the developers and the investors is definitely not happening this year.
Instead, trying new mediums for promoting affordable and mid segment housing projects in the country won't be a bad idea.
Broad frame work for banks to encourage home loans at higher loan to value ratio for low and mid segment properties would be a positive step especially for the first home buyers. A regulatory body in real estate becomes critical here to boost confidence of both banks and the customers.
Increasing the limit for priority sector lending for residential projects from INR 25 Lakhs is important for properties in tier 1 cities. Similarly it makes sense to decrease the limit in tier 2 and tier 3 cities. Also, making customers aware of such lending procedures along with governments mandate for banks to give such loans is equally critical.
The probability of the real estate regulation bill being taken up in the current budget session is very bleak especially with opposition voicing the current political scenario. Need of a regulatory body and transparency in real estate sector are vital for buyer's interest. But there is lot of work that needs to be done before the Indian realty sector gets stream lined and regularized.
The effort this year would definitely be towards improving the state of the economy and reducing inflation level. Along with being a populist budget, for long run, it would inculcate reforms to reclaim its global image as a lucrative market for investment. To conclude, the Union Budget 2013 would undoubtedly try and strike a balance between regaining the trust of the masses as well as improving global investor sentiments.
doc_373077318.docx
IN THIS PROJECT YOU WILL FIND ABOUT THE BUDGET AND COMMON MAN,
Budget 2013: What the common man wants
By Jayant Jain and Khyati Shah
Wed Feb 20, 2013 10:03am IST
Just as a farmer gazes into the sky each year waiting for the onset of the monsoon that would lead to a bumper harvest, the common man has a lot of expectations each time the finance minister rises from his seat to present the budget in parliament.
It's still not clear whether the budget P. Chidambaram unveils on February 28 would be a populist or a responsible one. But here's a look at the common man's wishlist. TAX EXEMPTION With rising inflation hitting pockets hard, raising the tax exemption limit to 300,000 rupees from 200,000 rupees would leave more disposable income in the hands of taxpayers, particularly those in the lower income bracket. INVESTMENT LIMIT The Income-Tax Act provides for a deduction of up to 100,000 rupees for certain investments/expenses such as retirement funds and insurance payments. In the absence of statefunded social security schemes, it is important for people to secure their post-retirement life. Increasing the limit to 300,000 rupees will encourage such investments. Further deductions like Section 80CCF (investing in infrastructure bonds) are also welcome as apart from encouraging savings, they also enable the government to direct the funds to priority sectors. HOUSE LOANS Every Indian dreams of owning a house. But while property prices are soaring, the interest deduction of 150,000 rupees on self-occupied property is too low. The limits should be increased to 500,000 rupees.
HEALTHCARE The rising cost of medical care is hurting the common man. Raising the exemption limits for reimbursement of medical expense to 75,000 rupees from 15,000 rupees should provide some succour. The deduction limit under section 80D for health insurance premiums should also be increased to 50,000 rupees from 15,000 rupees with more and more people opting for health insurance. ALLOWANCES While conveyance and education expenses have surged, the exemption limits haven't kept pace. These limits should be increased in proportion to the amounts spent. STANDARD DEDUCTION Salaried employees incur various expenses for upgrading their skill sets. But they are not allowed deduction of any expenses incurred during employment. A standard deduction up to 30 percent of salary with an upper limit of 75,000 rupees should be provided. ESOPs Employee Stock Ownership Plans (ESOPs) issued free of cost or at concessionary rates are taxed on the difference between fair market value and the amount actually paid by the employee. Levy of income tax on date of exercise creates a liability on the employee to pay tax on gains which are purely notional. Such taxation makes ESOPs less lucrative. Since ESOPs are a critical, motivational and retention tool for companies to retain talent, they should be taxable only on sale of shares. REFUNDS Revenue authorities need to ensure taxpayers get refunds and tax credit on time. This will encourage more Indians to pay tax.
…………………………………………….
E
very year the budget session of parliament heralds in a series of discussion and reports in the media. It is
important for us as citizens to also understand the budget because it has a direct impact on how much money we spend, save and invest over the coming year. This year the focus of the budget is likely to be the ballooning fiscal deficit. Now this may seem like a complicated term but it is not. Let me break this down for you. Siddhart is a young man with a tendency to spend more than he makes. At the end of every month when he runs out of cash and he resorts to borrowing from his friends to make up for the short fall. After several months of this behaviour, his loans have ballooned to a very large portion of his monthly salary.
That means the chances of him being able to pay off all his loans is very slim. His friends will soon realise this and stop lending him money all together. The country's fiscal deficit is much like, Siddhart's finances. When the government spends more than it earns the shortfall is called the fiscal deficit.
India's fiscal deficit during the financial year 2012-13 was 5.3 per cent of the national GDP, much higher than the
initial target of 4.6 per cent. This is not good because it causes nervousness among investors. he ballooning fiscal deficit has lead to several rating agencies, like Standard & Poor and Fitch, threatening to downgrade the country's credit rating to junk status. (The credit rating is an indication of its ability to payback its loans). There are several international pension funds that invest in India, and these funds are prevented by regulation to invest in countries with junk status ratings. If a downgrade happens these pension funds will be forced to pull out all of their money out of the country. When so many foreign investors exit and take their money home, it will have a negative impact on our currency and our economy. A weak rupee will result in high inflation because of the price of oil and petroleum that we import will go up. Long story short, the finance minister's main priority during this year's budget will be to reduce the fiscal deficit. This means he will have to cut his spending and increase his revenues. While as citizens we normally look forward to tax breaks in every budget, but this year's budget announcement may not be as generous.
Here is a list of all the major changes that are expected in the budget this year that will impact our finances.
Higher taxes for the super rich: In an attempt to increase direct tax income for the government the FM could consider imposing a surcharge on taxes for those who have an income above a threshold. Tax experts suggest this threshold may be Rs 22 lakh (Rs 2.2 million) a year and above. Industry associations have warned that such a move may dampen business sentiment and cause more tax evasion. Fresh deadlines for the Direct Tax code: The Direct Tax Code or the DTC is likely to be delayed further. The finance minister may want to take another look at the details of the code that have been modified drastically since he first began working on it. Besides, most governments are hesitant to introduce such drastic changes so close to a general election.
Bigger incentives for equity investments: The finance minister is expected to announce several measures to encourage retail investors to move more of their money into equity. This would help the sentiment in the equity market. The Rajiv Gandhi Equity Savings Scheme (RGESS) that was announced during the budget last year has failed to mobilize investor interest. The FM may modify this scheme to make it more accessible.
The FM is also expected to reduce Securities Transaction Tax (STT) and short term capital gains tax on equity to
boost more investor interest. Carrot and Stick approach to Gold: As Indians we tend to invest our money into gold to keep our capital safe. The spurt in gold imports over the last year has aggravated the current account deficit. The FM has been talking about the need to push savings into financial instruments rather than unproductive assets like gold. So expect higher tax on physical gold purchases and a bigger tax break for long term investments like insurance and pensions. Higher tax breaks for home loans: High interest rates and the high cost of real estate have kept several of us away from our dream homes. In an attempt to make homes more affordable the finance minister is expected to increase the Rs 150,000 interest deduction on housing loan repayment. Some tax experts expect the allowance to be doubled. On a parting note, you should always sit down with your financial planner in the days after the budget is announced to make sure your investment portfolio is taking full advantage of all the new tax breaks and changes made in the budget. While the finance minister will have to focus on maintaining the balance within his accounts, you need to focus on making the most of your money.
…………………………………
Budget 2013-14: Tax-payers pray for higher limits, tax-friendly schemes
While India’s Annual Budget is important to understand the Government’s planned revenue and expenditure, it is equally important to the common man to understand how his finances shape up as a result of this event.
While India’s Annual Budget is important to understand the Government’s planned revenue and expenditure, it is equally important to the common man to understand how his finances shape up as a result of this event. Small Tax Payers are typically the salaried class and small entrepreneurs, who are the first to be hit in case of any negative provision in the Budget.
The salaried class ends up paying all taxes religiously on the back of compulsory deductions by their employer. Therefore, it is but natural that a majority of expectations relate to the tax front. Apart from tax provisions, there are a few other areas where expectations are high from this section of the society. The following are some important expectations of small tax payers from this year’s budget:
Increase in Income Tax initial exemption limit and allowances: The current initial exemption limit of Rs. 2 lakhs is viewed to be low, considering that inflation has continued to remain stubbornly high. It is desired that the Government increases this limit to Rs. 3 lakhs for men assesses and Rs. 3.5 lakhs for women assesses, in order to increase disposable income in the hands of taxpayers. Additionally, allowances like transportation allowances (Rs. 800 per month), education allowance (Rs. 100 per month per child upto 2 children), hostel allowance (Rs. 300 per child upto 2 children) are limits defined in the Income Tax Act years earlier. It is felt that these allowances should also be revised upwards to reflect current price levels.
Reimbursement limit on medical expenses: Currently pegged at Rs. 15000 per annum, it is expected that this limit should also be increased, taking into consideration escalating healthcare costs.
Home Loan Repayment of Principal and Interest: Currently principal repayment of home loan is included under Sec 80C deductions. This section is one of the most used sections by taxpayers, and is mostly fully utilized, without even including the principal amount. Hence the amount deducted towards principal often doesn’t qualify for tax deduction. There is a
wide demand that principal repayment should be included under a separate provision of the Income Tax Act to get additional benefits. Another aspect of home loan is interest repayment. Interest repayment eligible for tax deduction is restricted to Rs. 1.5 lakhs per year, which is deductible under Sec 24(b) of the Income Tax Act. Since real estate prices have sky rocketed over the past few years, interest paid per year far exceeds this limit every year for most home buyers. It is hoped that an increase in this limit will be announced in this year’s Budget.
Increase in investment limit under Sec 80C: Income Tax Act’s most popular section Sec 80C’s limit has been fixed at Rs. 1 lakh for many years now. With the number of investment avenues included under this section being plenty, it is very easy for a person to exhaust this limit in a year, by investing in various eligible instruments. The common man expects that this limit should be increased at least in this year’s budget to a more realistic amount.
Infrastructure bonds inclusion: These bonds, which had tax exemption upto investments worth Rs. 20,000 were removed from the Income Tax purview. It is hoped that this provision is restored in this year’s budget, as the infrastructure sector is also is need of substantial funds for expansion.
Taxation on National Pension Scheme investments: Income from the National Pension Scheme is currently taxed on an EET (Exempt-Exempt-Taxable) system, which means withdrawals are taxed even though contributions and returns to the NPS are not taxed. Changing the status to EEE (Exempt-Exempt-Exempt) system means tax exemption will be available at all three stages - investment, appreciation and withdrawal. This will go a long way in enhancing returns of the retired who have invested in this scheme.
Increasing the exemption limit on interest of savings bank accounts: The interest you earn on savings bank accounts is exempt from tax upto Rs. 10000 per year. If this limit is increased to a higher amount, it will help in reducing tax outflow for those who maintain high balances in Savings accounts.
Launching tax-friendly equity schemes: The Rajiv Gandhi Equity Savings Scheme which was introduced last year provides tax benefits to first time investors in the equity markets. However, this investment is restricted to investors with an annual income of less than Rs.
10 lakhs. Increasing this limit beyond Rs. 10 lakhs and introducing more such schemes will help in benefiting more small tax payers.
The above are a few expectations from the Budget by the small tax payers. With the current high inflation in the economy combined with poor growth, there is a need for the Budget to include provisions which can increase disposable income in the small tax payers’ hands.
……………………………
What to and what not to expect from Budget 2013
Come February and one is flooded with talks and noises concerning the upcoming budget. The exhaustive panel discussions across media, all painting either rosy or bleak scenarios that the country could face, only adds to the confusion in the minds of the common man.
IndiaProperty.com
Come February and one is flooded with talks and noises concerning the upcoming budget. The exhaustive panel discussions across media, all painting either rosy or bleak scenarios that the country could face, only adds to the confusion in the minds of the common man. Sadly for him what he gets as budget updates is a list of sector specific populist wish lists - which most of the times are irrelevant for him.
What we have tried to do in this report is try and provide a concise précis of what this budget could bring to the real estate sector - both for the end user as well as the developer.
Let us start with the oft repeated introduction that almost all the reports start with - the subdued global outlook, the depreciating rupee, talks about "paused" economic reforms. The question that immediately pops up in almost all our minds is - what has that got to do with me having to bear inflated prices of properties?
Let us try and put it in context within the limitations of a "concise précis". The industries and sectors that one should watch out for are Steel, Coal, Power, and Chemicals. Along with the obvious Land, Cement and Manpower cost fluctuations what also affects the prices are seemingly unrelated sectors like the ones listed above.
Why because the real estate sector is one of the least insulated sectors and hence falls prey to the vagaries of global economic scenarios affecting either of these sectors.
Out of all the above Coal is the most important as it is the primary raw material used for Power, Cement as well as Steel Production.
Power because globally 42 percent of power is produced using Coal.
Coal is the core material required for steel as well as cement production. Even Fly Ash, which has become one of the fastest growing raw material segments in the Real Estate sector, is a by-product of Coal Combustion.
Funny how suddenly the budgetary discussions on these sectors become important for all of us looking at owning a house.
With Australia the second largest producer of Coking Coal and the largest exporter to India, it will be obvious now why any budgetary discussions involving unrelated scenarios like say, import concessions, become relevant for the masses.
Now about the impeding budget session, it is a known fact that in India populist budget sessions have always been used as a tool by governments to kick start their election strategies. This budget session is expected to be no different.
With elections round the corner and the draining popularity of the current government, it is highly likely that populist reforms could figure prominently. The Realty Sector can expect buyer friendly reforms to boost the sagging buyer sentiment. What we expect to see is fiscal pressures allowing for a gradual reduction in home loan rates over the year. Also, an increase in tax exemption limit on the interest paid on home loans from current INR 1.5 lakhs is one of the major expectations from this budget.
For the construction industry, in light of its larger inter-dependencies on various sectors and with the need to move away from a subsidy driven culture, their demand for subsidy on construction materials for low and mid segment projects is unlikely to materialize.
The sector getting infrastructure status with tax exemptions and other incentives for the developers and the investors is definitely not happening this year.
Instead, trying new mediums for promoting affordable and mid segment housing projects in the country won't be a bad idea.
Broad frame work for banks to encourage home loans at higher loan to value ratio for low and mid segment properties would be a positive step especially for the first home buyers. A regulatory body in real estate becomes critical here to boost confidence of both banks and the customers.
Increasing the limit for priority sector lending for residential projects from INR 25 Lakhs is important for properties in tier 1 cities. Similarly it makes sense to decrease the limit in tier 2 and tier 3 cities. Also, making customers aware of such lending procedures along with governments mandate for banks to give such loans is equally critical.
The probability of the real estate regulation bill being taken up in the current budget session is very bleak especially with opposition voicing the current political scenario. Need of a regulatory body and transparency in real estate sector are vital for buyer's interest. But there is lot of work that needs to be done before the Indian realty sector gets stream lined and regularized.
The effort this year would definitely be towards improving the state of the economy and reducing inflation level. Along with being a populist budget, for long run, it would inculcate reforms to reclaim its global image as a lucrative market for investment. To conclude, the Union Budget 2013 would undoubtedly try and strike a balance between regaining the trust of the masses as well as improving global investor sentiments.
doc_373077318.docx