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Meet us in Bahrain
7-October-2010
We are first time in Bahrain. Meet our MD and Sales Team at Hotal Ramada Palace. For details, please call on +973 36475817 We are in Bahrain till 13th October.
Budget 2010 comes with good investment opportunities for NRIs
25-March-2010
India’s budget yet again demonstrates to NRIs that investing in their homeland is probably the best option right now. The West is still struggling to climb out of one of its deepest recessions and provides low returns, while India’s growth story promises healthy returns. Surely, it’s time to wake up and smell the Indian coffee. Soon after the budget was read, the Indian stock exchange gave it a thumbs up sign without delay as the market climbed up by a hefty 175 points. The return on Indian equities in the past year has been calculated at 87.4 percent by The Times of India. If an NRI invested in real estate stocks for the last year, the returns would be a whopping 139 percent. The auto sector was not far behind as the returns on wheels was 184 percent. Again, consumer durables and the IT sector would have raked in returns at 150 percent and 125 percent respectively. Now, where would an NRI get his investment almost doubled in one year? As far as returns on fixed deposits are concerned, NRIs can reap much higher returns of eight percent for term deposits if they convert their currencies into Indian rupees. This compares with two to three percent when they keep their funds in hard currencies in India or abroad. Considering that over 100 banks have failed in the US following the meltdown and a number of British banks were also shaken. NRIs hastily sent their savings to India and the country’s foreign exchange reserves are hovering at a bulging $280 billion now. Source: http://www.indianrealtynews.com
Realtors to take up roll back of service tax with finance minister
18-March-2010
Chennai: Blaming the finance minister for failing to provide an overall and clear stimulus to the housing and real estate sector, the apex body of the organised real estate builders and developers, Confederation of Real Estate Developers Association of India (Credai) has said that the imposition of service tax will dampen the growth of the entire industry. Credai is planning to meet the finance minister to request him to roll back the service tax imposed on the realestate sector. In the context of India’s phenomenal housing shortage of approximately 24.7 million units and a huge need for space infrastructure to support its growth, Credai said the Budget has failed to adequately support the sector and hampered its efforts to reach its potential. Kumar Gera, chairman, Credai said, “I would say this Budget, by and large, is one in which’ status-quo’has been maintained for the real estate sector. The issue of applicability of service tax to all under-construction flats and homes being booked before their completion will increase the end cost and this will significantly impact affordability of the home buyer”. Gera added that the Budget had also failed to address the larger issues facing the country, in terms of an urgent need to meet the shortage in housing, which was last estimated at a staggering 24.7 million units in urban India alone. Despite the government’s stated desire to address this shortage through a PPP model, the Budget has made no provision to provide incentives that will attract private developers to take up more affordable housing initiatives. The high expectations for a push through incentives for slum redevelopment or slum eradication schemes in the Budget have also been missing. According to a release by the body of realtors, Credai sees two serious flaws in service tax provision. First, the sale of apartment or commercial spaces is a sale of immovable property and is governed by the Transfer of Property Act. It cannot, therefore, also be a service attracting service tax. Second, all states require buyers to pay stamp duty on the transfer or sale of apartments and commercial spaces and this ranges from 5-9 % across the country. The payment of stamp duty and service tax on the same property constitutes a clear case of double taxation.The national habitat policy governs the policy of development of housing in the country, which urges all state governments to reduce the stamp duty and bring it down to 2-3 %. Imposing a new tax is contrary to the declared policy of reducing the transaction costs on the sale of immovable property. Santosh Rungta, president, Credai, said, “The issue of applicability of the service tax levied on renting of commercial property and on under-construction units is a major area of concern for developers. This tax will be an additional burden and project costs will shoot up by 4-5%. Consumers, will will be most affected when this increased cost will be passed on to them. Indirect taxes on raw materials for the industry will fur there scalate project costs.” Source: The Financial Express.
Union Budget 2010-11: What it means for India’s real estate sector
18-March-2010
Published by Newsroom March 10th, 2010 in Newsbytes. Budget Highlights Against great expectations, the Union Budget 2010-11 turned out to be a mixed bag for the Indian real estate sector. While the Budget included many announcements that would catalyze real estate development, some initiatives, or the lack thereof, tempered optimism for the sector’s rapid recovery. Below are some key highlights of the policy announcements made within the Union Budget 2010-11 and our assessment of how they would impact the Indian real estate sector. New income tax regime The new income tax slabs introduced by the Government of India will reduce the tax burden for 60% of the taxpayers in the country. It is hoped that the resulting higher levels of disposable income would translate into greater consumption levels for products ranging from durable goods to real estate. Emphasis on infrastructure Over 46% of the total plan outlay (INR 173,552 crore) has been allotted for infrastructure development during 2010-11. Furthermore, an additional INR 20,000 in tax savings will be allowed for taxpayers who invest in infrastructure bonds, a policy move which will further infuse funds into infrastructure development in India. Reaffirming SEZs.
It was decided during FY2009-10 that only investment-linked incentives would be provided while profit-linked incentives would be done away with. The Government is yet to clarifying issues pertaining to this. However, the removal of an anomaly in Section 10AA of the SEZ Act for estimating export profits and the Finance Minister’s reaffirmation on the importance of special economic zones (SEZ) will help the real estate industry in taking forward its SEZ plans across the country. Urban development allocation up by 75% The Budget 2010 increased the allocation for urban development to INR 5,400 crore which includes INR 1,270 crore for slum redevelopment and INR 1,000 crore for housing and urban poverty alleviation. Interest subvention scheme on housing loans extended The one percent interest subvention scheme introduced during the FY2009-10 Budget has been extended for another year for housing loans of up to INR 1 million with property value of less than INR 2 million. This will continue to boost demand in India’s affordable housing market. Project completion period extended from 4 years to 5years Real estate developers, many of whom have struggled to complete projects due to the credit crunch can benefit from this extension as, under section 80-IB, they would be eligible for tax benefits within 5 years from the date of approval of their projects from local authorities. A 100% tax deduction on profits from housing projects was previously available within 4 years only. Increased housing unit size Budget 2010 increased the permissible built up area (BUA) of individual housing unit from 2% of the total BUA or 2,000 sq ft to 3% of the total BUA or 5,000 sq ft whichever is higher. This has the potential to positively impact the luxury housing market. ECB to be available for cold storage Greater access to cheaper funds through external commercial borrowings (ECBs) may help the development of quality cold storage facilities in the country, potentially benefiting the Indian logistic industry and driving demand for warehousing space. Currently, 25-30% of perishable food items in India are lost due to spoilage as India lacks quality cold storage facilities. 5 additional mega food park projects This would take the total number of food parks in the country to 27 and drive ample real estate development opportunities in the precincts of these new food parks. Investment linked tax incentive scheme to hotel industry Starting April 2010, a 100% deduction on capital expenditure (excluding land, goodwill, and financial instrument) has been proposed for 2 star hotels and above. This initiative would spur a supply-side boost to the hotel industry across India. No extension to sunset clause for STPI and EOU The Government was conspicuously silent on policies pertaining to Software Technology Parks of India (STPI) and Export Oriented Units (EOU). Tax benefits for occupiers of these units are set to expire on March 31st, 2011. By remaining silent on the issue, the Government has signaled its intent to let these tax holidays expire, a move that will benefit SEZs. Broadening the service tax net for real estate sector Definition of “renting of immovable property service” was clarified and widened to cover rent of vacant land under agreement/contract for undertaking construction of buildings or structures for business purposes. “Construction of complex service” activity is deemed to be a taxable service provided by the builder/promoter/developer unless entire consideration is paid after the completion of construction. Additional services provided by builders to prospective buyers such as providing preferential location or external or internal development charges (excluding vehicle-parking space) are also covered in the service tax net. Increase in excise duty from 8% to 10% Costs of material inputs such as cement will increase and drive up the cost of construction for real estate development. Hardening of interest rates The Government intends to gradually roll back the stimulus packages in tandem with tighter monetary policies by the Reserve Bank of India. As such, bond yields are expected to harden in the short term and be in the range of 7.75-8.25% during FY2010-11. A likely hike in interest rates would result in higher home loan rates and higher cost of funds for real estate development, both of which would dampen the recovery of the real estate sector. While not all expectations of the real estate community were met by the Union Budget 2010-11, a great many positive signs were witnessed. The Government’s clear emphasis on infrastructure development, it’s shift towards fiscal prudence and an effort towards lessening the burden on taxpayers are initiatives that will bode well for India’s real estate industry and its economy as a whole. However, the Government must continue to address the remaining issues that the industry faces if it is to ensure sustained growth and development of India’s real estate sector. Source: JLLM
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