Union Budget Expectations from RE sector in Andhra, Telangana
Preparations are rife for the presentation of Modi government’s maiden Union Budget for the financial year 2014-15. The Budget will be presented by Union Finance Minister Arun Jaitley on the floor of Parliament on July 10th. Expectations from the Budget are sky-high particularly from the Real Estate sector which has been going through a prolonged trough in recent years. During the Railway budget that was presented in Parliament on July 8th, 2014, it has been announced that 29 rail projects would be completed in Andhra Pradesh and Telangana at an expenditure outlay of about 20,680 crore. The specifics regarding this proposal are yet to be decided upon.
Huge expectations in AP and Telangana
Considering that the governments of Andhra Pradesh and Telangana have been recently elected and assumed office with much aplomb, expectations are high from the people of these states. Hence, they are waiting with baited breath for the presentation of the Union Budget, with the expectation that both these states would get considerable sops particularly in reviving the Real Estate sector. Incidentally the Real Estate sector in the region has been languishing in the dumps since the past couple of years due to the political uncertainty as well as the economic slowdown. Following the bifurcation of Andhra Pradesh and the formation of Telangana earlier this year, their hopes have been ignited. People expect the government to come up with some positive measures to propel infrastructure development in these states which could have a bearing on the Real Estate sector as well.
Infrastructure development
Both Andhra Pradesh and Telangana have much to look forward to with regards the presentation of the Union Budget. Both these states are in immediate need to upgrade the infrastructure, particularly in areas where a face-lift is required. Andhra Pradesh has to look towards developing a new capital, the process of which should be initiated sooner than later. Since the development of a new capital is a prolonged and complex procedure, the government should arrive at a decision regarding the new capital taking into consideration all necessary concerns and issues. This is likely to have a huge bearing on the real estate market in areas surrounding the new capital. Telangana can be considered fortunate to retain Hyderabad considering the tremendous growth that the city has seen in recent times. However, there is much more that needs to be done in terms of projecting the state as a favourable destination for inviting foreign investors and promoting growth. Hence, the Budget is equally crucial for both states in different ways.
Other expectations
Besides the expectation of promoting infrastructure development in both Andhra Pradesh and Telangana thereby paving the way for the revival of the Real Estate sector, there are various other expectations that the people of these states have from the Budget. Some of these are:
- According industry status to the Real Estate sector thereby boosting domestic bank lending, bringing in Foreign Direct Investment (FDI) in real estate as well as promote External Commercial Borrowing.
- Raise the tax exemption limit on interest payment of housing loans from Rs 1.5 lakh to about Rs 3 lakh.
- Promote affordable housing by allowing higher tax exemption limits on principal and interest repayment for home buyers.
- From the point of view of developers, there are expectations with regards to withdrawing curbs by the RBI with regards to banks lending funds for projects. This will considerably reduce the project expenditure due to the availability of cheaper funds from banks. Currently developers are opting for funds from NBFCs and PE funds, both of which are higher priced with an interest rate between 18-24 per cent.
- Develop a single-window clearance policy so as to fast-track the approval of real estate projects.
- Launch a new industrial policy for developing the real estate and construction sector in the region so as to promote industrial growth.
- Fast-tracking the clearance of land acquisition issues as well as other clearances like environment clearances and building approvals.
