Mumbai Real Estate Market Sees The Impact Of Union Budget 2012

As said by Mr

As said by Mr. Ramesh Nair, Managing Director of West, Jones Lang LaSalle India:

The Positives

Allowing external commercial borrowings (ECBs) in the low-cost housing segment and the supply of an affordable housing projects will increase the outskirts of residential property of Mumbai areas such as Virar, Boisar, Dombivili, Karjat, Nalasopara etc. on the heels of increased liquidity for budget home projects.

Extension of 1% interest subvention scheme on housing loans up to Rs. 15 Lakh wherein the cost of the residential property doesnt exceed Rs. 25 Lakh for another year, will help sustain demand for an affordable residential property in Mumbai.

Increased allocation for highways and other infrastructure projects will help boost development of Mumbais outskirts and increase the supply of residential property in Mumbai. Resulting in price stability and affordability over the long term. Investment-linked deduction of capital expenditure in affordable housing proposed to be raised to 150% from 100%, will also encourage more supply of low-cost housing in Mumbai city.

Reinforce the tax pass-through status for all types of Venture Capital Fund (VCFs) therell be renewed confidence levels of real estate private equity investors to invest in cities such as Mumbai which has seen most of the PE investments post the Global Financial crisis.

The announcement of central assistance and Japanese participation in the Delhi-Mumbai Industrial Corridor project is a big plus. Mumbais outskirts areas that lie along the corridor will see increased land values. The reduction of the withholding tax on ECB interest from 20% to 5% will help Mumbais affordable housing segment by creating much-needed liquidity for budget home developers. Here end user have more money available for home loans with the setting up of a credit guarantee trust fund to ensure better of institutional credit for housing loans.

The Negatives

Overall cost of residential property in Mumbai is likely to go up because of the hike in service tax from 10% to 12% which render real estate in Mumbai even less affordable - bad news for those who were waiting until the budget before buying property in Mumbai.

There was also no indication of the real estate sector being granted industry status which would have brought down the borrowing cost for developers thereby reducing home prices in Indias most expensive city. Nor were any new tax exemption schemes for IT/ITES companies mentioned such exemptions would have increased demand for the vacant IT Parks all over Mumbai. The finance ministry ignored the urgent need for an increase in the limit on tax deduction available on home loans interest from Rs. 1.5 Lakh presently.

Thereby the budget made no mention of re-introducing the 80 IB (10) tax benefit scheme for smaller-sized units which would have helped developers reconfigure and offer smaller units is need of the hour in Mumbai. Requirement of deduction of tax at source at the rate of 1% on payment of consideration for purchase of an immovable property will impact the cash flows of real estate developers. Lack of a decision on FDI in multi-brand retail will further discourage developers from constructing malls in the city. Leading to increased rentals in existing malls which are performing well. And delaying re-tenanting and repositioning of existing failed malls.

by: lokeshmanu24

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