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This year’s budget refl ects the Indian government’s concern and priority to improve the investment climate with the express view to stimulate growth. In a far reaching policy decision, the 2014-15 budget has met the long-standing demand to liberalise FDI norms for the construction sector by reducing built-up area requirement from 50,000 sq. mts to 20,000 sq. mts, and the minimum capitalisation requirement from US$ 10 million to US$ 5 million. Th is is likely to help mid-sized and small developers to have better access to FDI, in turn giving a much needed boost to aff ordable housing. And, in order to specially boost low-cost housing, exemption has been made for built-up area and capitalisation requirements. An NRI Achievers report…

The Union Budget 2014-15, in addition to various path-breaking fi llips it has proposed to revive the realty sector, has also taken into consideration that the maximum shortage of housing is in lowcost segment, the allocation of INR 4,000 Crore to the National Housing Bank to promote aff ordable housing is quite signifi cant. And by bringing housing for economically weaker sections and slum redevelopment under CSR, the budget has given impetus to boost supply of aff ordable housing, presumably with a view to achieve the goal of ‘Housing for All by 2022’.

Yet another signifi cant initiative which will boost investment is the introduction of REITs, bolstered adequately with tax incentives that will succeed in unlocking a hetherto new source of fi nancing for cash-strapped developers through the participation of retail investors. PE funds like Blackstone, Red Fort, Xander, Kotak Realty and few other leading developers are already showing keen interest to launch REITs. PE investors are upbeat, as they now have an exit route in the booming stock market. Even global pension funds which were earlier investing in Indian PEs are now directly deploying their funds in real estate assets. Th e Canadian Pension Plan Investment Board (CPPIB) has formed two separate JVs with the Shapporji Pallonji Group and Piramal Enterprises, to invest US$ 200 million and US$ 250 million respectively.

While focusing on real estate development by way of boosting supply through increased investment, the government has fully recognised that infrastructure is a key to real estate growth. Th e allocation of reasonably large funds for urban infrastructure projects, including the INR 51,000 Crore for development of national and state highways besides rural roads, the development of metro rail systems in cities with populations of 20 Lakh and above, taken along with measures to revive SEZs, together with investment of INR 7,060 Crore into 100 smart cities, and the setting up of seven smart industrial cities, are all signifi cant initiatives that will no doubt boost urban development. The twin measures of increasing home loan interest exemption limits by INR 50, 000 and raising the overall income tax exemption limit by INR 50,000, are being seen by home developers as major incentives to provide a fi llip to the housing market that has until now been languishing. Th ey now expect RBI to start reducing home loan rates, and this combination of tax incentives coupled with lower home loan rates will give the much needed impetus to the ailing housing sector.The budget has however not really addressed the more crucial issue of granting infrastructure status to real estate – an issue that has been one of the key demands of the sector. Presumably, it is attributable to the thinking in government that ‘industry status’ should follow only aft er the sector is ‘regulated.’ Hopefully, the government will plan to address this issue by bringing in the longpending ‘Real Estate Regulatory Bill’ in the Parliament during the coming session. Several other reform measures in coming months, to bring in transparency with a view to further boost the confi dence of investors, is likely to follow. In the backdrop of projects worth 6.26 trillion shelved, abandoned or stalled in 2013-14, project implementation with a view to boost investment and revive growth remains on top of government’s agenda, in line with the BJP’s poll promise of creating a conducive environment for doing business. Already the new government has cleared some big-ticket investment projects worth INR 21,000 Crore which had been held up for decades. Similarly, road projects with investments of INR 40,000 Crore that were mired for a long time, have also been given green signals. And in coming months, one may expect to see several other investor-friendly policies like liberalising ECB, amending land acquisition law, single-window clearance, introducing credit rating model for residential real estate projects to channelise investments in housing, and initiating escrow account model through levies on cement, steel etc., to fund aff ordable housing.

And as the Modi government embarks on administrative reforms to provide good governance besides initiating investorfriendly policies, real estate revival is well on the cards, with property markets heading for ‘achhe din.

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