The budget proposals such as extension of interest subvention scheme till March 2013; increase in priority lending limit to Rs10 lakh from Rs5 lakh and increase in provision under rural housing fund to Rs4,000 crore from the existing Rs3,000 crore are likely to boost the demand for rural and affordable urban housing.
Further, allowing ECB in the low cost affordable housing projects and also reduction in the withholding tax on ECB interest from 20 per cent to 5 per cent would help the sector in assessing cheaper funding. Setting up Credit Guarantee Trust Fund would also encourage investment in the affordable housing sector.
On the flip side, the increase in service tax from 10 per cent to 12 per cent will increase the overall cost of dwellings for the buyers. Overall there are no major proposals in the budget, which could provide an impetus to the real estate sector.