To discuss about how to imply relaxation on the norms related to external commercial borrowing (ECB), officials from both Finance ministry and the Reserve Bank of India, may meet this week. Continue reading
The report highlights the revised service tax and its impact on the consumers, the deduction in TDS and the current scenario of the External Commercial Borrowing (ECB) apart from its emphasis on the Chennai Realty Market.
Following are the key takeaways of the report:
– Chennai leads the market in terms of number of units under construction accounting for 68% of the total number of units coming up in the city, followed by the western region with 27%.
– Chennai is slated to witness the infusion of around 67500 residential units in the forthcoming three years.
– During 2011, the highest price rise was observed in the central areas of the city, to the tune of around10-18%.
– According to a United Nations study, Chennai has a deficit of around 60000 housing units. About 6000 of them are in the high income group segment, 12000 in the middle income group and 18000 in the low income group.
The Union Budget 2012-13 on Friday proposed allowing external commercial borrowing for low cost affordable housing projects.
Presenting the Budget in the Lok Sabha, the Finance Minister, Mr Pranabh Mukherjee, also proposed setting up of a Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing loans.
The Minister also proposed to enhance provisions under Rural Housing Fund from Rs 3,000 crore to Rs 4,000 crore besides extending the scheme of interest subvention of 1 per cent on housing loan up to Rs 15 lakh where the cost of the house does not exceed Rs 25 lakh, for another year.
Meanwhile, real estate players were disappointed with the Budget saying it failed to highlight the role of the housing sector in the economy.
“The proposal of bringing in an umbrella tax structure to the cement industry will increase the cost of housing and will negate the development process. Also providing ECB to affordable housing is a minor respite to the sector. There is an inherent risk of liquidity drying up wherein the exemption of capital gains tax to invest in small and medium enterprises may result in cash out from real estate,” Mr Lalit Jain, President, CREDAI, the industry body of real estate players, said.
The sector also said that the increase in service tax will increase the cost of construction by Rs 50-100 per sq feet.
According to Mr Anurag Mathur, Managing Director, Cushman & Wakefield India, “The increase in allocation in infrastructure implies a clear intent on enhancing the urbanisation process as well as providing a support to the slowing industrial sector. At the same time the increase in the service tax from 10 per cent to 12 per cent would lead to additional burden on the tenants as the service tax on rentals has remained unchanged.”
Plans by the promoters of top real estate company DLF to buy out hedge fund DE Shaw’s investment in family-owned DLF Assets (DAL) could hit a roadblock because of a little known rule in the country’s foreign exchange laws.
Under a ‘put’ option signed between DE Shaw and three companies controlled by DLF-promoter KP Singh’s family in May 2007, the US-based fund, which invested $400 million in convertible preference shares of DAL, could exit its investment and get a fixed return of at least 27%.
As per the ‘put’ option with DLF Investments, Kohinoor Real Estates and Buland Consultants, DE Shaw is supposed to get back around Rs 2,500 crore after forex adjustments. But FEMA classifies all equity investments that carry a fixed return as debt, which could bring DE Shaw investment under the purview of external commercial borrowing (ECB) guidelines.
With ECBs not allowed in the real estate sector, investors holding convertible stock with fixed returns could find their exit option blocked.