A new year … a new promise … a new wave… a new path… As India sets out for elections next year, Budget 2013-14 is one of the final initiatives by the current government to steer the country into the direction of growth. “Growth” being the operative word here, the Finance Minister Mr. P. Chidambaram, set the tone of the proceedings and that of the country, by saying, “Growth is our Highest Goal”.
One will be witnessing it’s direct impact on real estate, as roti, kapda aur makan are quintessential of the Indian way of living, and I don’t just mean in the good old Bollywood way. Acknowledging India’s recent impediment of lower GDP and given its diversity, the Finance Minister stressed on inclusive growth and sustainable development.
Keeping up the motto, “Foreign Investment is imperative”, the gates have been opened and measured liberalising norms would be enacted to increase investment flow through FDI, Foreign Institutional Investors (FII) and External Commercial Borrowing (ECB). This would not only make doing business with India easier but will also ensure a flow of funds directly and indirectly into the real estate industry. Relaxation of SEBI norms for registration of various classes of investment portfolios will mean that SPVs for various real estate funds will now be allowed to enter in India.
India will now fall in line with international practices where the foreign institutional investors will be allowed to participate in exchange traded currency derivatives. An investor with stake of 10% or less will be treated as FII and any stake more than 10% will be treated as FDI.
Higher allocation for building roads should help in development by strengthening connectivity and opening up of growth corridors. Encouragement for infrastructure debt funds, a source for long-term low-cost finance for large projects, will be positive for companies, including construction and engineering conglomerate Larsen & Toubro (LART.NS) and GVK Power & Infrastructure Ltd (GVKP.NS). However, the lack of measures to boost the housing sector and no clarity on a Real Estate Regulation Bill offset positive proposals like additional tax deduction on home loans of up to INR 2.5 million and allocation of INR20 billion for an Urban Housing Fund.
With the central elections lurking around the corner, the Finance Minister has delivered a rather safe budget. In order to consolidate country’s position with respect to its fiscal deposits, and get back on the ferrous wheel of 8% GDP growth, he has categorically emphasised on FDIs & FIIs, the measures for which are being shaped. All in all we were hoping a simmering Indian curry but it lacks the heat.
About the Author:
Chaitali Nathaney is a real estate investment advisor with Unesta. She has done her MSc in Real Estate Finance from Cass Business School, London. Chaitali is now based in the London office.