Real Estate Sector got no Resurgence.

Share of the housing sector to the overall GDP is likely to rise by one per cent to 6 per cent on increased investment revealed by the  latest Economic Survey. Currently, about 5 per cent of India’s GDP is contributed by the housing sector. With institutional credit for housing investment growing at a compounded annual growth rate of about 18-20 per cent per annum in the next three-five years, the housing sector’s contribution to GDP is likely to increase to 6 per cent.

As every rupee that is invested in housing and construction, Rs 0.78 gets added to the GDP. Investment in housing and real estate activities can be considered a barometer of growth of the entire economy. Unfortunately, the 2012-13 Budget does not recognise this. Although the finance minister’s speech concludes by reiterating the fact that there is a need to create an “enabling atmosphere” and that India is on the brink of “resurgence”, he has done precious little to make that happen.

Interest subvention scheme of 1 per cent on housing loans up to Rs 15 lakh (on houses costing up to Rs 25 lakh) for another year also does not make sense, unless and until the limit of Rs 25 lakh is increased.

India’s GDP has not been growing as it was sometime earlier was the topic of the finance minister before presenting the Budget did nothing much to bring about any significant turnaround. His five-point objective does not really lay any emphasis on the housing and real estate industry. While he has tried to restrict central subsidies by 2 per cent of GDP to improve the quality of public spending, he has failed to provide for measures which will give impetus to the industry at large, housing and real estate in particular.

The Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing finance is a long-term institutional mechanism and would not have any immediate impact on the industry.

The finance minister has permitted external commercial borrowings (ECBs) for low cost affordable housing projects. One wonders if this would do any good, since players in this industry are not used to taking the ECB route for affordable housing projects. This provision therefore does not make sense.

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