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Budget '13: Rude Shock For Realty?

Published on Fri, Mar 01,2013 | 16:52, Updated at Tue, Apr 02 at 12:34Source : 

By: Gautam Mehra, Executive Director, PwC India

A first peep into the Budget 2013 indicates a ‘balancing act’ by the Finance Minister. Budget 2013 was presented in the backdrop of a slowing economy with fiscal deficit and low tax GDP ratio.  Given the conflicting nature of these factors, there was little choice to increase taxes or offer significant tax incentives. 

Indian Real Estate space has been facing strong head winds for some time due to continuing global economic uncertainty and the domestic socio-political and economic issues.  There was wide-spread hope that the Budget provides the much-needed impetus to take the sector back on the growth curve. 

Policy reforms proposed in the Budget are encouraging; however, the tax proposals may prove to be a dent to the impetus. 

Allocations to the rural and proposed urban housing funds are promising signs and the road map for development of intra-city industrial corridors seems to be a positive step towards developing ‘Smart’ cities.  

Tax break on interest paid on home loans by first time home buyers may not have significant impact.  TDS while purchasing property could broaden the tax base, assuming a large number of property transactions are not appropriately reported.  Increase in service tax is insignificant to scare luxury home buyers.  Tweaking in “the Agricultural land” definition, could lead to loss of tax benefits.

All in all the provisions are not likely to change the sky line of cities.  At best the issues faced by this sector are deferred to another day in February!

(Co-authored by Bhairav Dalal, Associate Director, Financial Services, PwC India)


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