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adProperty News

Will the housing sector benefit
Source : The Hindu Property Plus Published On : 2008-02-09 City : Chennai

Are the plans for the Union Budget, including the issues relating to real estate sector, been upset by the stock market mayhem, asks K. SUKUMARAN


An ‘all set’ platform for the Union Budget for 2008-09 was ready till January 21 when the stock market spoiled the Finance Minister P. Chidambaram’s party, though he may not agree with this.

     Some may say that our economy is quite resilient and independent of the American economy and that we will grow at 9-11per cent at any cost.


     Yet, on the verge of recession threatening the U.S. economy, and the panic reduction in interest rate by the Federal Reserve, there has been some hectic withdrawal of investments from the Indian stock market.

     The real estate and infrastructure stocks too tumbled without any semblance of resistance.

     In this background, let us try to fathom the possible budget scenario and the proposals that may directly or indirectly affect real estate-related segments.

     A comparison of the vital issues at the time of preparation of the 2007-08 Union Budget and the Budget for the 2008-09 may be of some help.

  • Higher level of inflation.
  • International crude oil prices were around $ 80.
  • Dollar was strong and attractive.
  • Poor agricultural sector growth.
  • Political scene was positive.
  • Interest rates were high.
  • Property prices were high.
  • Inflation under control except some hiccups.
  • Crude prices are around $ 90.
  • Weak dollar and problems of exporters.
  • Growths in farm sector still not enough.
  • Nuke deal problems generated stress.
  • Interest rates need to soften further.
  • Property prices continue to be high though demand has slackened.

The housing and infrastructure sector now has the headaches of   high stamp duty, construction tax, high cement and steel prices etc.

              In all probability, the following considerations may be dictating the 

          budget policies:

  • Price control.
  • Reduction in interest rates.
  • Soaps to sectors such as export, IT, agriculture.
  • Rural employment.

     Apart from continuation of rural housing and differential interest / subsidy supported programmes, we can probably predict that the following areas may receive greater attention:

  • Reduction in excise duty on cement and steel.
  • Reduction in interest rate on housing loans by raising the small loan ceiling.
  • Reduction in construction / service tax.
  • Relief for infrastructure projects with Private-Public Participation.
  • Relief for developers / promoters for providing houses to minorities / urban poor.
  • Additional levy on luxury home constructions on the ground of ability to pay.
  • Direction to State Governments to consider reduction in stamp duty and registration charges.

Let us hope that justice will be done to all.



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