Budget 2013 could not cheer realty: Sources

With the Budget 2013 over, it is time now to find out how different sectors are reacting and if their respective Budget wishlists have been addressed. The real estate sector, for one, is mostly disappointed. CNBC-TV18s Priyanka Ghosh reports.

From the first impressions after Budget, it seemed like P Chidambaram had an ace up his sleeve for prospective home buyers. As a fillip to affordable housing, an additional interest benefit of Rs 1 lakh on first time home loans upto Rs 25 lakhs was announced. However, on closer inspection, this provision is only valid for the first year with a carry-forward benefit of the unutilized deduction to the second year; this has dampened much of the initial exuberance.

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Arun nanda, non-exec chairman, Mahindra Lifespaces says, I was hoping for some more incentive for the affordable segment. Incentives like reducing the taxation of that segment. I also hope for introduction of an investment fund like Real Estate Investment Trust (REIT). The abatement on houses of more than Rs 1 crore in metro cities will be a dampener in the short term.

It is a dampener as the rate of abatement on 2000 square feet plus apartments or houses costing Rs 1 crore and above has been reduced by 5 percent to 70 percent. This translates into an increase in service tax outflow, making luxury homes more expensive. Market analysts are pegging this increase to be between 0.5-0.8 percent.

Moreover, for homes costing above Rs 50 lakh, tax deducted at source (TDS) of 1 percent will be charged on the transfer of immovable properties. While some industry experts feel the TDS charge will improve accountability of transactions, others say it will add one more cumbersome paper work to be complied with, making procedures more cumbersome.

Apart from these specific proposals, the focus on job creation, education and building back investor appetite in the market are being read as positive signals; measures like setting up of the urban housing fund by National Housing bank (NHB) with an allocation of Rs 2000 crores are also being welcomed as a step in the right direction. Apart from these, the consensus in the real estate industry is that Budget 2013 has been lackluster and overall, a disappointment.