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February 26, 2000

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Sector report: Housing

Dun and Bradstreet India

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Inputs
Cement, steel and paint.

Key Players
Tata Housing, DLF, Ansals, Raheja Builders, Hiranandani Constructions, Great Eastern Developers, Mahindra Realty, Godrej Properties, Alacrity, SI Properties, Embassy Developers, Shapoorji Pallonji.

Tax Structure
Though not of immediate relevance while discussing the Union Budget, the housing sector would definitely benefit if state governments move to rationalise stamp duty structure. Indicative rates of stamp duty below help reinforce this view:

Maharashtra   1999-2000
(in Rs.) Residential Commercial
Upto Rs 100,000 Nil -
Rs 100,000–250,000 0.50% -
Rs 250,000-500,000 Rs. 1,250 + 3.0% -
Rs 0.5-1 million Rs. 8,750 + 6.0% -
Above Rs 1 million Rs. 38,750 + 8.0% -
  - Flat Rate of 10%

Karnataka: Flat rate of 6 per cent

Kerala: Flat rate of 13.5 per cent

Background

  • Traditionally, the housing sector has been cyclical in nature.
  • Housing sector witnessed a major boom in the early nineties.
  • Economic slowdown, oversupply and exit of non resident investors (NRI) investors pushed the industry into a major downward spiral from the mid-1990s.
  • The sector witnessed a shakeout during this period with marginal and weak builders exiting the business.
  • The housing industry has begun a slow recovery in 1999-2000 with purchases by actual users driving the revival. The measures announced by the government in the Union Budget 1999 have also helped accelerate the recovery.

Expectations from the Budget
The sector desires the following from Budget 2000:

  • It wants to be accorded industry status.
  • Low cost, large scale rural and urban housing should be accorded infrastructure status.
  • Allowing the deduction of interest paid on home loans in respect of self-occupied property in full as in the case of let-out property
  • Income tax deduction should be allowed for repairs and related expenses incurred by individuals on their self-occupied properties, subject to suitable ceilings.
  • Depreciation benefit should be allowed to companies on company financed purchase of residential houses by individuals. This will provide an incentive to corporates to assist employees in purchasing homes, thus spurring housing growth.
  • The government should encourage the setting up of real estate mutual funds.

ALSO SEE:

What will Yashwant Sinha do?

How will personal taxes change?

Fiscal report card

SECTOR ANALYSIS:




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