Union Budget: A mixed bag for real estate

The Finance Minister Pranab Mukherjee presented the Union Budget for the Financial Year 2012-2013. As expected the Opposition came down heavily on the Government describing the Budget as anti-poor. Leaving aside the other sectors, the Budget has failed to cheer the real estate sector. The Budget has allowed External Commercial Borrowings (ECBs) for the affordable housing segment and the real estate developers will be able to raise money from overseas markets at lower interest rates. However, experts are of the view that this measure is not sufficient to boost the overall real estate sector in any big way.

Moreover, the Finance Minister’s move to exempt proceeds from the sale of any residential property from capital gains tax, if such money is invested in equity or equipment of an SME, have also been welcomed by experts cautiously.
No doubt the measure will give the home buyers more reinvestment options. In the long run this may lead to outflow of cash from the real estate sector which is already not in a healthy shape in so far as credit flow is concerned.

Anuj Puri, Chairman & Country Head, JLLS, said earlier the only route for exemption of such proceeds was purchase of another property or tax saving bonds. He feels that this move may also result in a lowering of sales volumes on the secondary sale market.