Union Budget 2010 Impact on Real Estate sector

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Real Estate sector has received adequate assistance from Union Budget 2010, while it is still recovering bravely from the Mid 2008 sprawl. The Budget which proposed reasonably priced housing below ` 20 lakhs along with a 1% interest grant for housing loan upto 10 lakhs is expected to have great impact on the realty sector of India.

Union Budget 2010 Impact on Real Estate sector

The Finance Minister in his budget speech proposed the extension of interest grant plan of 1% on individual home loans of upto ` 10 lakh for divisions amounting to ` 20 lakh till March 30, 2011. In addition, excise tariff on cement is hiked to ` 290/ tonne against the previous ` 230/ tonne. This would be applicable if the retail sale cost does not supersede ` 190 for 50/ kg bag or 10% of retail sale cost. In case if the cement is traded in an unpacked form then 10% will be taxed or which ever is greater than 8%.

An increase in excise tariff has also been proposed by the FM to 10% against the previous 8%. The additional price on corporate tax has been deducted to 7.5% against the existing 10%, while on the other hand MAT has been increased to 18% against the previous 15%. The initiative is expected to benefit firms involved in realty business as most of them does not fall under the MAT purview. They are also expected to benefit from the efficient decrease in corporate tax.

Union Budget 2010 Feedback from Real Estate Sector

The increase in excise tariff on steel, cement and other components will affect the industry adversely at the time of slow recovery. The sector can also not take steps to implement the same to its customers. However, they feel that the extension in the completion of projects to 5 years against the current 4 years came as a relief.

The 1% interest grant plan on upto ` 10 lakh for all individual home loans extended till March 30, 2011 is a promising initiative to trigger the inexpensive housing divisions pricing upto ` 20 lakhs. This 1% interest grant is expected to reduce EMI rate considerably in realty sector and enhance its affordability. Due to greater affordability, developers will undertake more and more projects and work towards the development of this sector.

Last updated on : 15-05-2011

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