This is a moderate budget as far as its positive implications on the real estate sector are concerned. The fact that Section 80-IB of the Income Tax Act (sub-section 4) which pertains to tax incentives for specified industrial undertakings comes as a relief, as developers would otherwise have incurred an additional tax burden that would have been passed on to end users.

The five-year tax holiday afforded to Delhi, Gurgaon, Ghaziabad, Faridabad and Gautam in context with the upcoming Commonwealth Games will benefit those areas. This move will pump in demand for property in these areas and therefore push prices up.

The fact that service tax will be levied on commercial properties is definitely a step backwards. It will cause the cost of lease rentals to rise proportionately - another added burden that will be transferred directly to the end users.

The drop of excise duty on cement, though beneficial to the construction industry, will not translate into an overall boost of more than 1-2%.

The higher initiative to continue in public-private partnerships is definitely encouraging. It will help maintain growth in the real estate sector.

The $6 billion infrastructure fund formulated by the Deepak Parekh Committee last year is being put into effect and this is nothing but good news for the infrastructure industry. Investment in infrastructure will become easier, helping to escalate infrastructure development. This will obviously have positive repercussions on the real estate sector as well.

The prospect of completion of all major undertakings associated with the Golden Quadrilateral project by 2009 is extremely positive, since this will enhance connectivity between metros and bring in a considerable supply of land. New corridors will open up, and these will be typified by affordable rates that will benefit end users. In fact, the budget's thrust on rural infrastructure will escalate real estate opportunities in areas that were hitherto neglected. Moreover, it will lessen the movement or rural dwellers to urban areas, thus decreasing the load on our already saturated cities.

The finance minister's willingness to seriously implement the plans of turning Mumbai into a world-class financial hub has put this intention into the public domain and we can certainly look forward to some major positive changes in Mumbai's real estate market.

Quick Takes

• Section 80-IB pertaining to tax incentives for specified industrial undertakings is a relief • Five-year tax holiday afforded for Commonwealth Games will benefit those areas • Service tax will be levied on commercial properties and this is definitely a step backwards • Higher initiative to continue in public-private partnerships is encouraging • Using the $6 billion infrastructure fund formulated by the Deepak Parekh Committee is most welcome • Completion of all major undertakings associated with the Golden Quadrilateral project by 2009 is positive • Thrust on rural infrastructure will escalate real estate opportunities • The announcement of turning Mumbai into a world-class financial hub is a positive change

The introduction of reverse mortgage and mortgage guarantee companies, which will translate into direct security for homeowners, is a welcome move. Reverse mortgage is a special loan against residential properties that allow for conversion of a portion of the equity in such properties into cash. But unlike a traditional home equity loan, line of credits or second mortgage, no repayment is required until the borrower no longer uses the home as principal residence.

Because the budget denies venture capital funds (VCF) tax exemption to all other than those investing in certain high-tech industries, there is now far less incentives to invest in real estate-related VCFs. This is a serious limitation, considering that India has not yet adopted REITS as vehicles for investment in real estate. Though denial of tax exemption for VCFs is applicable only from the coming financial year, those existing now will also be affected.

No regulatory provisions for controlling home loan rate are announced. In other words, interest rates are still left to the market and no provisions to guard against further escalations are in place. However, the fact that the budget aims to exceed the yardstick of 15 lakh houses under Bharat Nirman Programme is extremely good news for the low-cost housing sector. Corporates would now be encouraged to invest in this sector, and it will provide very healthy profit margins after this new development.

—The author is MD, Trammell Crow Meghraj