The presentation talks about the impact of the budget on real estate in India

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Impact of budget 2014 on
real estate
South India Real Estate Symposium 19th
July 2014

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FDI Investments
• Built up area for FDI reduced from 50,000 square metres
to 20,000 square metres and capital from US$ 10 million to
US$ 5 million for the development of smart cities.
• Will allow less money to flow faster
• Smaller projects can now raise money through FDI boosting
affordable housing
• Projects with a min of 30% of the total project cost
allocated to affordable housing will get exemption from
minimum built up area and capitalisation requirements,
with the condition of three year lock-in.
• This will again push a lot of focus on affordable housing which is
the need of hour for the country.

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Housing for all
• A sum of 4,000 crores has been allocated for affordable
housing by government with a focus on “housing for all”
facilities.
• Increase in deduction limit on account of interest on loan in
respect of self occupied house property from 1.5 to 2
Lakhs.
• Increase in investment limit under section 80C of Income
Tax act from 1 to 1.5 Lakhs.
• Will help buyers with more income in hand encouraging them to
invest in real estate
• CSR participation which is mandatory for organizations
now has a new inclusion in form of slum development

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REITs
• Investor perspective on REITs
• Investors around the world have recognised real estate as an
asset class that is an essential part of a diversified portfolio.
• REITs however are seen as a cost-effective and efficient way to
access investment grade real estate in tandem with professional
management
• According to the draft guidelines, any investor, resident or foreign,
can invest in REITs in India. However, initially, until the market
develops, it is proposed that the units of the REITs may be offered
only to HNIs/institutions.
• The minimum capital required to invest in REITs would be Rs
200,000 as according to SEBI, the minimum unit size is Rs
100,000 and one needs to buy atleast two units to invest in REITs

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REITs
• There are five major reasons why an investor should invest
in REIT
• Returns: REITs are required to distribute at least 90 per cent of the
net income to the unit holders; thus, they offer an advantage over
equity stocks where companies may choose not to pay dividends
and hence it’s a more consistent form of return
• Diversification: REIT has a low correlation with other asset
classes, such as equities and bonds due to the fact that real estate
earnings do not behave like corporate earnings.
• Low correlation provides a better platform for diversification by
reducing the volatility of a multi-asset portfolio.
• Investment in REIT gives better diversification within the real estate
asset class compared to direct investments that are capital intensive
in nature. This provides the exposure to invest in different micro-
markets that are indifferent phases of the real estate cycle

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REITs
• Easy Exits: REITs are publically traded, therefore provide more
advantages in terms of liquidity compared to direct real estate
investment. They also have potential for capital gains if the share
price of the REIT rises
• Transparency: REITs will be registered and regulated by SEBI,
and they will adhere to high governance and information
disclosure standards
• Professionally managed: REITs are professionally managed and
have access to a large capital base, which gives investors
potential benefits, such as economies of scale, professional
market knowledge and access to high value properties

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REITs
• Proposal on tax pass through status for Real Estate
Investment Trusts (I-REITs) in India.
• Currently all assets are funded through banks – This will however
allow a lot of investors to participate and fund real estate projects
• REITs target completed projects and hence this will lead to faster
project completion, and bring-in the much needed transparency.

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Smart Cities
• Smart cities have become the buzz word in India ever
since PM Modi has started talking about it.
• Rs 7,060 crore has been sanctioned to develop “100 smart
cities”, as satellite towns of larger cities and by
modernizing the existing mid-sized cities.
• The Amritsar Kolkata Industrial master planning will be
completed for the establishments of Industrial smart cities
in seven States of India.
• Master planning of three new smart cities in the Chennai-
Bengaluru Industrial Corridor region, viz., Ponneri in Tamil
Nadu, Krishnapatnam in Andhra Pradesh and Tumkur in
Karnataka will also be completed.

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Expressways
• 37,880 Cr is allotted for the construction of highways and
expressways to NHAI, which includes 3000 Cr proposed in
North East.
• 500 Cr will also be set aside by NHAI for project
preparation
• North eastern India which hasn’t been the focus of most budgets
gets a reasonably bigger share this time
• This will help develop the area, increase proximity and improve
connectivity
• Rs 100 crore provided for setting up a National Industrial
Corridor Authority, with its headquarters in Pune.
• Plan for the Bengaluru Mumbai Economic corridor (BMFC)
and Vizag-Chennai corridor with the provisions for 20 new
industrial clusters.

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