The announcement with respect to external commercial borrowing now being permitted opens up a huge opportunity for developers want to cater to the bottom of the pyramid with housing units targetted at the lower income classes even though the overall expectations haven’t been met.
This move will ensure better capital availability for developers of low-cost housing which will result in timely project execution, which will boost volumes and since low margins are typical of this sector, only higher volume growth will make it attractive to developers.
The Union Budget 2012-13 throws up a mixed bag for the real estate sector. The government’s initiative to make affordable housing available to a larger section of the society has only been met partially. Initiatives such as external commercial borrowing (ECBs) for the affordable and low-cost housing segment will help the sector to tap long-term funds and help ease the liquidity in the sector.
Extension of the 1 per cent interest subvention scheme for affordable housing will help the buyers to avail a loan limit of Rs 25 lakh. Also the measures to increase funding for highways and other infrastructure will help put more territories on the real estate map.
The Union budget has no real measure for the real estate sector as most of the industry expectations have not been met. The most important demand across all real estate companies is that of an industry status being assigned to the sector has been still pending.
Even though all the expectations have not been delivered. The most important demand of increase in the limit on tax deduction available on home loans interest from current Rs 1.5 lakhs remains unanswered.