Business Today

Real estate - Thriving with increased investments

The Indian Real Estate Industry witnessed heightened activity in 2007 characterised by massive development, sustained end-user demand and increased interest from international players.

     Print Edition: Budget 2008 Special

Increase in number of real estate companies
Increase in number of real estate companies
The Indian Real Estate Industry witnessed heightened activity in 2007 characterised by massive development, sustained end-user demand and increased interest from international players.

In 2007, there was a sharp increase in the number of real estate companies tapping the capital markets.

Nine real estate developers raised close to $3.6 billion (Rs 14,400 crore) in 2007 through initial public offerings (IPOs), where DLF’s IPO alone attributed for about 65 per cent of this sum.

Private equity (PE) investments boosted the real estate sector, where the number of investments more than doubled since last year. Some of the major PE deals include Merrill Lynch’s investment of $424 million (Rs 1,696 crore) in DLF and Morgan Stanley’s $152-million (Rs 616-crore) investment in Oberoi Constructions.

On the regulatory front, the Urban Land Ceiling and Regulation Act (ULCRA) was repealed by the Maharashtra government, while SEBI issued guidelines with respect to real estate mutual funds, which may pave the way for small investors to leverage the investment opportunities in the sector.

Corporate impact

  •  
    Niranjan Hiranandani, Founder and Managing Director, Hiranandani Constructions
     “It’s certainly not a visionary budget. We were expecting that the Finance Minister would reintroduce the tax benefits for small houses, but even that has not happened”

    Niranjan Hiranandani
    DLF: The company expects some re-invigoration in the housing market with a reduction in construction prices owing to a reduction in
    CENVAT rates for the manufacturing sector from 16 to 14 per cent

  • Unitech: With the increase in tax exemption limit, it is counting on easy affordability of EMIs on new and existing loans to boost its sales. Will also be benefitted by the nonextension of tax exemption currently available to software technology parks

  • Hiranandani Constructions: Little or no impact of the tax exemption limit being raised due to high interest rates on home loans. Was expecting re-introduction of tax benefits on small houses that were withdrawn last year

  • Indiabulls: Expects consumption to get a leg-up with increased tax exemption limit. Expects a positive impact on the sector with net income going up

Sectoral impact

  • Reverse mortgage income exempted from income tax and capital gains tax

  • Five-year tax holiday allowed to hospitals and two-, three- and four-star hotels established in specified areas between 2008 and 2013

  • Elimination of double dividend taxation in case of Indian holding companies is a positive move for the sector since a lot of real estate assets are held by companies in SPVs

  • Much-awaited Real Estate Investment Trust (REIT) taxation left unaddressed

  • Policy to help improve corporate debt market may be useful for the sector

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