Finance minister Pranab Mukherjee?s announcement of a 1% subsidy on housing loans of less than Rs 10 lakh for houses under a Rs 20-lakh pricetag, and extension of income-tax exemption for developers on housing projects of 1,000 to 1,500 sq ft within 25 km of a city for projects approved before March 2008, has definitely kindled hopes in both the investor as well as the developer community. The move will, however, please buyers in Tier-II and Tier-III cities much more than in the metros.
Since the cost of land acquisition in metros is much higher, it is tough to fix the bulk of projects in the less than Rs 20-lakh segment. Having said this there?s no denying the fact that there will be benefits even then.
The developers, so far, have preferred a margin game vis-?-vis volume trade since it meant less work with a premium tag, something that they would now have to start changing. And buyers who had become fence sitters owing to prohibitive pricetags may now actually be able to start owning houses.
The extent to which the real estate sector would benefit from the move remains to be seen since the structural inefficiencies from which the sector suffers still need to be rectified. However, it seems that the real estate developers who until now were basing their projects on sheer expectations and market sentiment?hence experiencing sporadic growth?will now start getting policy directions, something the sector was always deprived of.
The real estate sector has always been seen as important considering the large-scale indirect employment attached to it. Additionally, demand for sectors like steel and cement depend upon the performance of this sector. However, somewhere in the midst of its growth, backed by a boom phase, the focus blurred with prices sky-rocketing and emphasis shifting to luxury-end projects. Thankfully, the correction seems to have taken place and one should expect that slowly but steadily, the struggling real estate companies would be back on track.
anandita.mankotia@expressindia.com
