Budget 2012: Here's a bag full of views

ECB for low cost housing project gives breather

Allowing ECB for low cost housing projects is a welcome one when developers finds it difficult to raise funds.

Moreover the interest subvention of 1% for housing loans upto Rs 15 lakh for a a property value upto Rs 25 lakh is also good one for realty sector along with allocation of Rs 5000 crore each to HUDCO and NHB.

-- KK Raman, Ex. VP & Zonal Head, DLF

Budget did not cherish the mood of the Indian investor nor the foreign investor

POSITIVE FOR RUPEE

• More services brought under the service tax bracket to raise the tax receipts.
• Capital market reforms positive for the broking industry and better price discovery.
• Drop in STT to reduce the cost of trade and increase the volumes.
• Rise in Service tax from 10% - 12% shall aid in rise in tax revenues strengthening for rupee.
• All positive for rupee prices in near term.

NEGATIVE FOR RUPEE

The government in its budget has addressed the following concerns:

Inflation: the crude prices are expected to average $ 115 from $ 90 levels raising inflation and also the subsidy and import bill cost.

We expect it to be much more higher than the expected levels at least for the first two quarters of 2012.

Fiscal Deficit: With drop in tax receipts and 18% rise in the unplanned expenditure we expect the fiscal deficit also to move up pressuring the rupee lower.

In both major cases the rupee stance is weak and there is no promising efforts towards economic development.

Also, as expected the excise duty has been hiked which is negative for the markets as it will rise in the cost of acquisition of the products to the end user -- impact weak for rupee.

The reduction of the basics customs duty in most of the cases will no doubt reduce the cost for the importers but will raise the import bill and dollar demand for import payments resulting in weakening of the rupee to higher levels.

The budget did not cherish the mood of the Indian investor nor the foreign investor.

The rise in crude prices and the import bill will only be the major tasks or hurdles in the way of future move of INR.

--Pramit Brahmbhatt, CEO, Alpari Financial Services (India)

Model Schools scheme can make quality education accessible to all

"Heartening to see government of India putting consistent efforts to strengthen the education sector as a whole and to improve the quality by promoting private-public partnerships.

The much anticipated Model Schools scheme is a landmark of sorts for the sector and is expected to be a huge step in making quality education accessible to all.

This coupled with enhanced spending on SSA, RMSA and skill-development augurs well for integrated education service providers.

Move to allow QFIs invest directly in corporate bond market will enhance liquidity.

Overall I am pretty sure that we are on course for the 7.6% GDP growth projected for FY '13."

-- Sanjeev Mansotra, chairman & global CEO, Core Education and Technologies Ltd.

ECB for affordable housing ensure better supply

Our reaction to Union Budget 2012-13 is mixed at best.

It seems fair to state that the Indian real estate sector does not have much to cheer about.

To begin with, it is difficult to see the raising of the personal income tax exemption limit from Rs 1.8 lakh to Rs. 2 lakh as anything more than tokenism.

It is certainly not relevant for the aspiring Indian middle-class home buyer.

The expected exemption limit of Rs. 3 lakh would have had some significance.

That said, the 1% tax rebate for home loans of upto Rs.15 lakh on homes costing upto Rs. 25 lakh will prove beneficial for developers in this segment.

Exempting proceeds from the sale of a residential property from Capital Gains tax if they are invested in equity or equipment of an SME definitely provides home owners with more reinvestment options.

Previously, the only route for exemption was purchase of another property or tax saving bonds.

At the same time, this move could also result in a lowering of sales volumes on the secondary sale market.

The increase in the service tax rate from 10% to 12% will increase the cost of production for developers, who are already reeling under high input costs.

It follows that this increased burden will be passed on to end users.

Allowing External Commercial Borrowing for affordable housing is, without doubt, an excellent move.

It will ensure better capital availability for developers of low-cost housing.

This sector is typified by low margins, and it becomes attractive only if developers are enabled to produce greater volumes. Better capital availability will help in timely project execution, which will result in higher volumes.

The postponement of a firm decision on FDI in multi-brand retail came as a disappointment.

We seem to have missed yet another opportunity to boost the Indian economy by ways of significant foreign capital inflows.

On the other hand, the increased spend on warehousing will certainly help the retail real estate sector, since more storage capabilities will help retailers to expand into more cities and towns.

Likewise, the measures to increase funding for highways and other infrastructure will help put more territories on the real estate map.

-- Anuj Puri, chairman & country head, Jones Lang LaSalle India

1% Interest subvention for home loan defines what is affordable homes –

Interest Subvention of 1% for home loan upto Rs 15 lakh for property whose value is less than Rs 25 lakh will be good for the Realty Industry.

So far there is confusion what is affordable homes are and this in a way defines what is affordable homes and this measure will boost the demand.

Currently though there is dearth of offerings in the range of 350-600 sft housing stocks with the realtors being mandated to allocate significant offerings in affordable segment.

-- Preetham Mehra, Head Chennai Operations, CB Richard Ellis

Economics triumphed politics in Union Budget 2012-13

Economics triumphed politics in the budget for FY13 (year ending March 2013).

Expectations were running low after the dismal performance of the ruling Congress government in recent state elections and the budget was a litmus test on the government's commitment to judicious economic policies.

In the event, the government has presented what we see as a credible budget: the fiscal deficit is projected at a higher-than-expected 5.1% of GDP in FY13, down from 5.9% in FY12 (budgeted: 4.6%).

The government faced the option of projecting a lower but unrealistic deficit number, or a higher, more credible number.

Choosing the latter is prudent, in our view, and we do not see much room for slippage.

The medium-term fiscal policy statement projects the fiscal deficit to decline further to 4.5% of GDP in FY14 and to 3.9% in FY15.

The government plans to finance 93% of the deficit through market borrowings (versus 84% last year), pegging net borrowing at INR4.8trn, 10% higher than FY12 and gross borrowing at INR5.7trn, a rise of 12%.

In our view, the government has been realistic in its tax revenue, disinvestment and growth projections.

The hike in indirect tax rates is inflationary, but was necessary to raise the tax-to-GDP ratio.

Quality of spending has also improved, as capital expenditure is projected to rise faster than revenue expenditure.

The government has committed to restrict expenditure on subsidies to under 2% of GDP from 2.4% in FY12, but with no concrete measures yet, we see room for overshoot on the subsidy bill.

However, there is enough of a cushion in other spending to be able to absorb this, in our opinion. We also do not see much populist policy in the budget.

We believe the continued reliance on asset sales to lower the deficit and the lack of a clear-cut plan on subsidies are the only negatives.

The government now needs to walk the walk.

-- Sonal Varma, economist, Nomura Union Budget 2012-13: Complete coverage