2. CONTRIBUTION BY REAL ESTATE
• The real estate sector has contributed only 5%
of India's overall GDP this year as compared to
a contribution of 10.6% in FY 2010-11. With the
lack of cheap credit and increased debt
servicing levels and with the declining rate of
foreign direct investment in the real estate
sector, the Union Budget 2012 was the only
aspiring ray of hope for the sector to get back
on track.

3. HIGHLIGHTS OF BUDGET
• External Commercial Borrowing (‘ECB') doors
are proposed to be made open for specified low
cost affordable housing projects which could
potentially provide the much needed liquidity to
the housing sector.
• Further, the interest to be paid on the ECB loan
availed from the period July 2012 to June 2015
by the real estate developer is proposed to be
subjected to a lower rate of deduction of tax at
source of 5% from the existing rate of 20%.

4. HIGHLIGHTS CONTD…
• One lakh dwelling units for paramilitary forces to be
built
• Interest subsidy for home loans up to Rs 1 lakh
• Rs 2,000 cr for rural housing fund under National
Housing Bank
• Indira Awaas Yojna hiked by 63% to Rs 8,883 cr
• Housing allocation hiked under Rajiv Awaas Yojana
• Hiked public investment in infrastructure – Fund
allocation for urban poor

5. HIGHLIGHTS CONTD…
• Accommodation is 3,973,000 cr
• JNNURM (Jawaharlal Nehru National
Urban Renewal Mission) allocation
hiked by 87 per cent
• NHAI allocation up by 23 per cent
• Hike infrastructure investment to over
9% of GDP by 2014

6. ANALYSIS OF BUDGET
• There is an absence of any intent to address the issues
concerning the sector.
• High property prices and low demand coupled with tight
lending scenario has further postponed the ambition of
owning a house.
• Higher allocation for infrastructure and rural oriented
scheme should have a positive cascading effect on the
economy. Thankfully, residential leases have been kept
out of the ambit of service tax.

7. • Another lost opportunity by our Finance
Minister, who could have done significant lot to
drive the consumer demand for real estate and
turn the fortunes of the sector and in turn give a
fillip to GDP growth in 2012-13.
• It is difficult to see the raising of the personal
income tax exemption limit from Rs 1.8 lakh to
Rs. 2 lakh as anything more than tokenism. It is
certainly not relevant for the aspiring Indian
middle-class home buyer.

8. • The 1% tax rebate for home loans of upto Rs.15
lakh on homes costing upto Rs. 25 lakh will
prove beneficial for developers in this segment.
• The increase in the service tax rate from 10% to
12% will increase the cost of production for
developers, who are already reeling under high
input costs. It follows that this increased burden
will be passed on to end users.

9. • Allowing External Commercial Borrowing (ECB)
for affordable housing is an excellent move. It
will ensure better capital availability for
developers of low-cost housing.
• The increased spend on warehousing will
certainly help the retail real estate sector, since
more storage capabilities will help retailers to
expand into more cities and towns.

10. • Hike in indirect taxes will definitely impact
the cost of delivery of real estate impacting
overall demand. Further, shifts in tax slabs
are too small to influence incremental
demand.

11. CONCLUSION
• Investment linked deduction available for low
cost affordable housing projects increased
from 100% to 150%. This amendment may
provide a much needed fillip to the
affordable housing segment by way of
getting a higher rate of deduction on capital
expenditure though cost of land (which
constitutes majority portion of cost) is
excluded.

12. • Venture Capital Funds (‘VCF') focussed on real
estate sector can now breathe a sigh of relief
with the reinforcement of tax pass through status
for all types of VCFs. By virtue of this
amendment, the VCF making investment in a
real estate SPV will not be subject to tax and the
tax will be levied at the investor level.
• This amendment does away with the age old
controversy surrounding taxation of trusts and
will result in reduction of litigation.

13. • One of the major proposal which may have a huge
impact to the real estate sector relates to the
requirement of deduction of tax at source @ 1% on
payment of consideration for purchase of an
immovable property having value in excess of Rs.
25 lakhs (Rs. 50 lakhs for immovable property
situated in specified urban areas). This proposal
may have an immediate cash flow impact for the
real estate developers selling their projects to
innumerable buyers.

14. • Increase in Service Tax rate from 10% to 12%
coupled with increase in the excise duty rate for
inputs and materials used in the real estate
sector may lead to an increase in the property
prices for the ultimate buyers. This may increase
non-affordability of properties in a market where
pricing concerns have been prevailing since a
while.

15. THANK YOU