Pranab Dutta, vice-chairman and managing director at the Indian unit of Knight Frank LLP comments on India’s budget.
India will cut the budget deficit to 4.6 percent of its gross domestic product in the fiscal year ending in March 2012, Finance Minister Pranab Mukherjee said in his annual budget speech in parliament today. India will extend an interest rate subsidy on housing loans, Mukherjee said.
“Despite being a positive budget, from a real estate perspective, the urban middle-income housing consumers who have been reeling under the pressure of spiraling prices seem to have been left out of any meaningful benefit.
‘‘The minimum alternate tax on Special Economic Zone developers has been advanced by a year. This will increase the skepticism in the minds of SEZ developers about the future tax benefits of developing such zones. While it was to be implemented under Direct Tax Code from 1st April 2012, the advancement of this tax by one year will be a dampener.
‘‘During the last one year, the prices of residential real estate has increased by 10 percent to 20 percent across several cities. The enhanced limit for interest subvention will ensure continued benefit to the buyers of this particular segment.
‘‘Increase in the priority sector lending limit is in line with the increase in the property price. Priority sector tag to home loan up to 2.5 million rupees will ensure credit flow at relatively cheaper interest rate to this segment.
‘‘Banks and financial institutions were reluctant to lend to low-income groups and economically weaker sections on account of poor repayment capability. However, the provision of a Mortgage Guarantee Fund for housing loans to these segments will provide the required safety cushion to financial institutions, which provide home loans to them, resulting in higher fund flow to this segment.
‘‘The Rural Housing Fund allocation of 30 billion rupees ($663 million) will provide the much needed impetus for the growth of housing in the rural centers.’’
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