The pros and cons of the Budget

Anuj Puri,
Chairman & country head,
Jones Lang LaSalle
Meghraj (JLLM)

Despite fears of a global slowdown and the US subprime crisis spilling into the streets of India, the real estate sector and commodity market have been given a cold-shoulder in the Budget. But property honchos are banking on the rise in disposable incomes and fall in construction costs to give a leg-up to building activities.
Disappointments:
No decisive announcement has been made on the extension of the STPI scheme which is discouraging. It is also of definite concern to IT/ ITES occupiers and developers, given that a large number of SEZs will take beyond March 31, ‘09 to be fully functional.
The industry expected that service tax on rent would be scrapped.
No specific direct benefits available for the retail industry in this budget. However, reduced overall taxation in various areas will result in higher disposable incomes and will have some positive effects for this sector.
Short term capital gains tax has been raised to 15%. This will not have a significant bearing on future investments in real estate, which in any case is not a suitable route for investment horizons below 3-5 years.
The budget seems to have overlooked affordable housing in urban areas.
On a high note:
Green development has been given a special focus. It indicates that sustainable real estate development has now been recognised as the wave of the future in real estate. The introduction of an institutional mechanism in this field is a step in the right direction.
The increase of rural infrastructure funding will help alleviate the burden on urban areas by boosting development in rural areas and therefore reducing migration to the urban cities, and the burden on urban infrastructure.
The raising of allocation for the Bharat Nirman Yojana to Rs 31,280 crore is a step forward. We can anticipate increased supply of land across all sectors of real estate as a result of this investment in infrastructure, which will open up large parcels of land for development in the mid-to-long term.
Commercial space will benefit from the fact that there is a focus on national knowledge centres.
The special focus on education and healthcare is encouraging. It will have a positive impact on the inherent value of townships developing in many parts of the country.
Value for the real estate sector in the fact that a 5-year tax holiday has been granted to Tier II/III city-based hospitals and 2/3/4 star hotels in UNESCO-specified heritage districts.
The Budget is good news for Tier-II and Tier-III cities, where infrastructural development will ensure that they continue to boom.

source