UNION BUDGET 2013 - A SNEAK PREVIEW

1Q 2013 | RESEARCH

Impact on Real Estate I Neutral

Company
BSE SENSEX Realty Index Anant Raj Ltd. D B Realty Ltd. DLF Ltd. Godrej Properties Ltd. HDIL Hubtown Ltd. Indiabulls Real Estate Mahindra Lifespace Orbit Corporation Ltd. Parsvnath Developers Peninsula Land Ltd. The Phoenix Mills Ltd. Sobha Developers Ltd. Sunteck Realty Ltd. Unitech Ltd.

Change (%)
-1.52 -2.72 -2.05 -3.54 -0.27 -2.97 -5.62 0.23 -7.51 -2.12 -4.00 -0.69 -2.93 -0.77 -0.04 -0.99 -7.95

Honorable Finance Minister P. Chidambaram started his budget speech 2013-14 with the pretext of slowed global economic growth in 2012. He acknowledged that the Indian Economy is challenged and mentioned that the Indian economy is constrained because of a high fiscal deficit; its reliance on foreign inflows to finance the current account deficit; decreased savings and lower investment; a tight monetary policy to contain inflation and strong external headwinds. He assured that the budget spelled out measures for each of the above mentioned issues. The agenda for the Union Budget 2013-14 is set for higher growth leading to inclusive and sustainable development. The finance minister projected the economy to grow by 4.8% in the next fiscal down from 5.5% in 2012-13. The real estate sector had high hopes this year from the Budget. However, the budget remained silent on most of the major issues such as enactment of the Real Estate (Regulation and Development) Bill, revision of Land Bill, granting industry status to the sector or infrastructure status to the much ailing affordable housing sector etc. None the less, there are a few small measures that have been taken for the real estate industry in this budget. THE KEY HIGHLIGHTS OF THE BUDGET WHICH MAY IMPACT REAL ESTATE SECTOR ARE AS FOLLOWS: 1% TDS on value of the transfer of immovable properties where the consideration exceeds INR 50 lakh; No TDS for agricultural land transfer; Impact: This move would help to increase the much needed transparency in the real estate transactions. The provision of deducting 1% as TDS will improve the reporting of such transactions and improve the government revenue from capital gain taxes arising from such transactions. Increase in excise duty rate on marble from INR 30 per sq. meter to INR 60 per sq. meter; Impact: The increase in excise duty rate on marble will affect the sector by increasing in the overall construction cost. This impact will however be minor considering the percentage of cost allocated to this particular construction material and the alternates available. The impact will probably be felt more in the luxury residential and hospitality construction sectors.

Source: www.bseindia.com | Feb 28, 2013

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1Q 2013 | RESEARCH

UNION BUDGET 2013

KEY HIGHLIGHTS (CONTINUED)

Continuation of service tax exemption for low cost housing and single residential units; Impact: The service tax exemption for low cost housing and single residential units will further encourage affordable housing scenario in the country. Reduction in rate of abatement from 75% to 70% for houses and flats of more than 2,000 sq. ft. or valuing more than INR 1 Crore; Impact: This move will particularly impact the premium residential properties admeasuring at 2,000 sq. ft. or more on carpet area basis or valuing more than INR 1 crore by making them more expensive due to increase in service tax. Increase in provision under Rural Housing Fund to INR 6,000 crore from the existing INR 4,000 crore; Impact: The rural housing fund maintained by National Housing Bank is used to refinance lending institutions for providing loans for rural housing. The increase in fund will help to provide housing finance at competitive rates to targeted groups in rural areas. Allocation of INR 2,000 crore for creation of Urban Housing Fund to National Housing Bank; Impact: With the success of rural housing fund where so far 400,000 families have taken housing loan, the urban housing fund has been created to provide housing finance at competitive rates in urban areas. Allocation of INR 15,184 crore for Indira Awas Yojna; Impact: Under this scheme the financial assistance is provided to some of the weakest sections of society to upgrade or construct a house. Allocation of INR 15,184 crore will help to achieve Governments vision to replace all temporary houses from Indian villages by 2017.

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UNION BUDGET 2013

KEY HIGHLIGHTS (CONTINUED)

Allocation of INR 5,000 crore to NABARD to finance construction of warehouses, godowns, silos and cold storage units designed to store agriculture produce; Impact: This fund will enable finance for construction of new supply chain facilities at competitive rates for both public and private sector and boost the investment in retail and industrial sector. Increase in the exemption limit of home loaninterest payable through a seprate section under chapter VI A of IT Act from 1.5 Lakh to 2.5 Lakh; Impact: This increase will promote home ownership in turn give boost to the affordable housing sector and other related industries like steel, cement, brick, wood, glass. However, this incentive is made available only for those taking their first home loan; upto a limit of INR 25 lakh. Provision is made to claim this exemption in the second year in case the limit is not exhausted in the first year itself. Enhancement of the exemption limit for the general category of individual taxpayers from INR 200,000 to INR 220,000; tax credit of INR 2,000 to individual tax payer having total income up to INR 5 lakh: 10% surcharge on income above INR 1 crore; Impact: Increase in disposable income in the hand of common man which will in turn increase the spending power and boost domestic investments. However, at the same time the surcharge on the individuals, HUFs, Firms and entities having income above INR 1 crore will augment government revenues and help the government. in fiscal consolidation. Conclusion: From real estate perspective the budget seems to be salient; the realty Index and most of the listed real estate companies reacted negatively after the budget announcement. The budget stated that during the 12th five year plan, infrastructure investment will go up to INR 55 lakh crore out of which 47% is expected to come from private sector. The Government has allocated INR 21,700 crore to PMGSY (Pradhan Mantri Gram Sadak Yojana), INR 14,873 crore for JNNURM (The Jawaharlal Nehru National Urban Renewal Mission)

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1Q 2013 | RESEARCH

and INR 20,000 crore for Rural Infrastructure Development Fund. Government has also encouraged the investment in the infrastructure via raising funds from Infrastructure Debt Funds (IDF), India Infrastructure Finance Corporation Ltd (IIFCL) in partnership with the Asian Development Bank and issuing the tax free infrastructure bonds to a limit of INR 50,000 crore. Further, the budget assured improvement in communication regarding taxation and regulatory policy to boost overall confidence of investor in doing business in India. All these measures are thus expected to enhance capital inflow and indirectly give impetus to the real estate industry.

Industry Expectations from Budget 2013 -14

Wish-list
Industry status to Real Estate Sector Infrastructure status to Affordable Housing, Integrated Townships and Group Housing Projects Enactment of the Real Estate (Regualtion and Development) Bill

Results

Developer / Investors Individuals

Approval for The Land Acquisition, Rehabitilation and Resettlement Bill Single window clearance for new projects Extension of tax exemption under section 80 IA (4) for industrial parks Relaxation in the deadlines proposed under revised DTC for Special Economic Zones Extension of the external commercial borrowing (ECB) scheme to the entire Indian Real Estate Sector MAT reduction to 5% for units located in Special Economic Zones (SEZ) Incentives for low cost housing technoligies and raw material by reducing import duty, excise duty and sales tax Provision of additional FSI for public parking and utilities development Additional FSI for developing smaller affrodable houses (300-500 sq ft)

Wish-list
Reinstatement of the tax holiday benefits under Section 80IB (10) for Affordable Housing Projects Increase in the exemption limit of home loan interest payable under section 24 (b) from 1.5 Lakh to 2.5 Lakh Provision of additional FSI for public parking and utilities development Increase in limit of interest subsidy upto INR 5 lakh from the existing INR 1 lakh Exclusion of principal repayments on home loans from benefits under section 80 C and inclusion of separate tax exemption entity Continuation of service tax for low cost housing and single residential unit. Inclusion of Housing Finance Companies (HFCs) deposits for tax exemption u/s 80C of Income Tax Act Increasing the deduction u/s 24(a) of the IT Act for repairs, maintenance, etc. from the current 30-50% Removal of service tax on Under Construction Property Extension of the existing scheme of interest subvention of 1% on housing loans upto INR 15 Lakh where cost of the house does not exceed INR 25 Lakhs for another year

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1Q 2013 I RESEARCH
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MID-YEAR 2012 | RETAIL

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APAC OFFICE

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INDIA BUDGET 2012-13

Q1 2012 | RESEARCH

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GLOBAL

GLOBAL

A SNEAK PREVIEW

HIGHLIGHTS

HIGHLIGHTS

UNION BUDGET 2012 -13

Record Rents for Top Retail Corridors; Global Slowdown Impacts Momentum Elsewhere
ANN T. NATUNEWICZ Manager | Retail Research | USA
Colliers 2012 Global Retail Streets survey found that of 129 locations tracked, 51 posted higher year TOP 10 GLOBAL RETAIL STREETS*
(USD PER SQUARE FOOT PER YEAR)
ANNUAL RENT CHANGE (USD)** (%)

Record Rents for Top Retail Corridors; Global Slowdown Impacts Momentum Elsewhere
ANN T. NATUNEWICZ Manager | Retail Research | USA
Colliers 2012 Global Retail Streets survey found that of 129 locations tracked, 51 posted higher year TOP 10 GLOBAL RETAIL STREETS*
(USD PER SQUARE FOOT PER YEAR)
ANNUAL RENT CHANGE (USD)** (%)

Budget Highlights | Real Estate

MARKET REACTION TO BUDGET

Company
BSE SENSEX Realty Index Anant Raj Inds D B Realty DLF Godrej Properties HDIL Hubtown Ltd. Indiabulls Real Estate Mahindra Lifespaces Orbit Corp. Parsvnath Developers Peninsula Land Phoenix Mills Sobha Developers Sunteck Realty

Change (%)
-1.19 -1.26 -6.04 -2.02 0.15 -2.82 -5.21 -4.13 -1.95 -0.72 -3.37 -4.04 -3.18 -2.65 3.04 -1.13 -1.68

Finance Minister Pranab Mukherjee started his budget speech 2012-13 in the

Retailers entering new marketsboth developed and developingcontinue to hedge risk by targeting the same one or two premier locations, generating heated competition and outsized rental rate growth in a handful of space-constrained corridors. Companies with the most ambitious long-term expansion plans remain focused on emerging markets with rapidly growing middle-class populations, but recently institutional capital has pulled back somewhat to favor core markets and investments. as Cairo and Athens), high streets with strong fundamentals remained remarkably resilient, suggesting, at least for now, some separation between macroeconomic issues and underlying real estate fundamentals. has already begun to impact retailers revenues and could hinder landlords near-term ability to

STREET/PRECINCT

Retailers entering new marketsboth developed and developingcontinue to hedge risk by targeting the same one or two premier locations, generating heated competition and outsized rental rate growth in a handful of space-constrained corridors. Companies with the most ambitious long-term expansion plans remain focused on emerging markets with rapidly growing middle-class populations, but recently institutional capital has pulled back somewhat to favor core markets and investments. as Cairo and Athens), high streets with strong fundamentals remained remarkably resilient, suggesting, at least for now, some separation between macroeconomic issues and underlying real estate fundamentals. has already begun to impact retailers revenues and could hinder landlords near-term ability to

STREET/PRECINCT

New York Fifth Avenue Hong Kong Queen's Road Central, Central (tie) Hong Kong Canton Road (tie) London Old Bond St.*** Paris Avenue des*** Champs-lyses Hong Kong Causeway Bay New York Madison Avenue

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mentioned that due to adverse global economic sentiments there has been a slowdown in the Indian Economy but the fact is India still remains among the front runners in the economic growth in any cross country comparison. The budget aims at faster, sustainable and more inclusive growth across sectors rapid revival of high growth in private investment, removal of supply bottlenecks, addressing malnutrition in 200 high burden districts and expedite improvement in delivery system, governance and transparency. From a real estate perspective, the budget remained silent on most of the major issues including status of STPIs (Software Technology Parks of India), Real arrive at a political consensus on the issue of allowing 51% Foreign Direct Investment (FDI) in multi-brand retail. THE KEY HIGHLIGHTS OF THE BUDGET WHICH MAY IMPACT REAL ESTATE SECTOR ARE AS FOLLOWS: projects.

New York Fifth Avenue Hong Kong Queen's Road Central, Central (tie) Hong Kong Canton Road (tie) London Old Bond St.*** Paris Avenue des*** Champs-lyses Hong Kong Causeway Bay New York Madison Avenue

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Milan Via Monte Napoleone Sydney Pitt Street Mall

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This spring proved to be a tricky time to conduct global benchmarking, as market sentiment has deteriorated markedly since April. During the past year, virtually every entity making a forecast including Colliers in our 2012 U.S. Retail Outlook

Source: Colliers International * selected cities ** exchange rate as of March 31, 2012 *** Zone A rents

More than two years post-recession, though, results from our annual survey of High Street rents illustrate that the worlds priciest retail corridors continue to attract the most sought-after tenants at lofty rental rates. Eight of Colliers top ten Global Retail Streets in 2011 made the list again this year. The big story, however, lies with the explosive year over year rental growth achieved in a handful of markets. Six 20%. At a regional level, streets in areas that entered 2007-08 better-positioned economicallyAustralia, slower to emerge from the recession. We will be watching these areas closely. Even as they represent some of the most attractive destinations for expansion-minded companies and yield-seeking investor they too are vulnerable to softening consumer demand and, for those with reliable data, encroachment of e-commerce. survey, conducted in April 2012. The second incorporates content from Colliers brokerage and research teams worldwide who contributed market operational metrics, nuanced commentary on retail conditions, and forward-looking opinions on what the next year will hold for consumers, landlords, and investors.

OFFICE PROPERTY MARKET OVERVIEW

INDIA
QUARTERLY UPDATE | JANUARY | 2013

REGIONAL RETAIL RESEARCH CONTACTS

AMERICAS > Ann T. Natunewicz Ann.Natunewicz@colliers.com EUROPE/MIDDLE EAST/AFRICA > Zuzanna Baranowska Zuzanna.Baranowska@colliers.com ASIA > Simon Lo Simon.Lo@colliers.com AUSTRALIA/NEW ZEALAND > Nora Farren Nora.Farren@colliers.com

Residential Property Market Overview

INDIA
QUARTERLY UPDATE | NOVEMBER | 2012

Milan Via Monte Napoleone Sydney Pitt Street Mall

Source: Colliers International * selected cities ** exchange rate as of March 31, 2012 *** Zone A rents

(.) ( .)

This spring proved to be a tricky time to conduct global benchmarking, as market sentiment has deteriorated markedly since April. During the past year, virtually every entity making a forecast including Colliers in our 2012 U.S. Retail Outlook

Unitech
Source: www.bseindia.com | Mar 16, 2012

ASIA PACIFIC OFFICE MARKET OVERVIEW

3Q 2012

More than two years post-recession, though, results from our annual survey of High Street rents illustrate that the worlds priciest retail corridors continue to attract the most sought-after tenants at lofty rental rates. Eight of Colliers top ten Global Retail Streets in 2011 made the list again this year. The big story, however, lies with the explosive year over year rental growth achieved in a handful of markets. Six 20%. At a regional level, streets in areas that entered 2007-08 better-positioned economicallyAustralia, slower to emerge from the recession. We will be watching these areas closely. Even as they represent some of the most attractive destinations for expansion-minded companies and yield-seeking investor they too are vulnerable to softening consumer demand and, for those with reliable data, encroachment of e-commerce. survey, conducted in April 2012. The second incorporates content from Colliers brokerage and research teams worldwide who contributed market operational metrics, nuanced commentary on retail conditions, and forward-looking opinions on what the next year will hold for consumers, landlords, and investors.
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external commercial borrowing (ECB) norms as interest rate charged is lower in case of external borrowings in comparison to rates charged by domestic institutions. - Increase in provision under Rural Housing Fund to INR 4,000 crore from the existing INR 3,000 crore. groups in rural areas at competitive rates. - Extension of the existing scheme of interest subvention of 1% on housing loans up to INR 15 lakh where the cost of the house does not exceed INR 25 lakh for another year. by providing cheaper loan to the end users.

REGIONAL RETAIL RESEARCH CONTACTS

AMERICAS > Ann T. Natunewicz Ann.Natunewicz@colliers.com EUROPE/MIDDLE EAST/AFRICA > Zuzanna Baranowska Zuzanna.Baranowska@colliers.com ASIA > Simon Lo Simon.Lo@colliers.com AUSTRALIA/NEW ZEALAND > Nora Farren Nora.Farren@colliers.com

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