colliers analysis | real estate perspective | union budget 2013 -14

Colliers International 1 www.colliers.com/india

Impact on Real Estate I Neutral

THE KEY HIGHLIGHTS OF THE BUDGET WHICH MAY IMPACT REAL ESTATE

SECTOR ARE AS FOLLOWS:

1Q 2013 | RESEARCH

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

Company Change (%)

BSE SENSEX -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

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.

UNION BUDGET 2013 - A SNEAK PREVIEW

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 few small measure has been taken for the real estate industry in this budget.

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: Although the increase in excise duty rate on marble will affect the sector by increasing in the overall construction cost. This impact will be minor considering the percentage of cost allocated to this particular construction material and alternates available. The impact will probably be felt more in the luxury residential and hospitality construction sectors.

2

UNION BUDGET 2013KEY HIGHLIGHTS (CONTINUED)

2www.colliers.com/india

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 Government’s vision to replace all temporary houses from Indian villages by 2017.

1Q 2013 | RESEARCH

www.colliers.com/india

KEY HIGHLIGHTS (CONTINUED)

1Q 2013 | RESEARCH

UNION BUDGET 2013

Colliers International 3 www.colliers.com/india

Allocation of INR 5,000 crore to NABARD to finance construction of

warehouses, godowns, silos and cold storage units designed to store

agriculture produce;

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;

Increase in the exemption limit of home loan interest payable under

section 24 (b) from 1.5 Lakh to 2.5 Lakh;

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.

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.

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)

1Q 2013 | RESEARCH

Industry Expectations from Budget 2013 -14

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

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

Provision of additional FSI for public parking and utilities development

Additional FSI for developing smaller affrodable houses (300-500 sq ft)

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

Increase in limit of interest subsidy upto INR 5 lakh from the existing INR 1 lakh

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

Exclusion of principal repayments on home loans from benefits under section 80 C and inclusion of separate tax exemption entity

Deve

lope

r / In

vest

ors

Indi

vidu

als

Wish-list Results

Wish-list

Results

4www.colliers.com/india

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.

Colliers International (India) provides property services to property Investors and Occupiers. We deliver customised service solutions utilising local and global knowledge in partnership with our clients via our property Investment and Occupier service lines. These service lines include - OfficeServices, Facility Management, Project Management, Residential Services, Investment Services and Valuation & Advisory Services.


For research related queries please contact:

This book is printed on 100% Recyclable paper

1Q 2013 I RESEARCH

Accelerating success.

Recent Reports : GLOBAL RETAIL INDIA OFFICE INDIA RESIDENTIAL APAC OFFICE GLOBAL RETAIL INDIA BUDGET 2012-13

OFFICE PROPERTY MARKET OVERVIEW INDIA

QUARTERLY UPDATE | JANUARY | 2013

Accelerating success. Accelerating success.

Residential Property Market OverviewINDIA

QUARTERLY UPDATE | NOVEMBER | 2012

ASIA PACIFICOFFICE MARKET OVERVIEW

3Q 2012

Accelerating success.

STREET/PRECINCT

RENT

(USD)**

ANNUAL

CHANGE

(%)

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-Élysées

Hong Kong - Causeway Bay

, .

New York – Madison Avenue

.

Milan – Via Monte Napoleone

( . )

Sydney – Pitt Street Mall ( . )

HIGHLIGHTSGLOBAL

www.colliers.com

MID-YEAR 2012 | RETAIL

ANN T. NATUNEWICZ Manager | Retail Research | USA

Colliers’ 2012 Global Retail Streets survey found that of 129 locations tracked, 51 posted higher year

Retailers entering new markets—both developed and developing—continue 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, suggest-ing, 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

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

More than two years post-recession, though, results from our annual survey of High Street rents illustrate that the world’s 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 economically—Australia,

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 investorthey 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.

Record Rents for Top Retail Corridors; Global

Slowdown Impacts Momentum Elsewhere

TOP 10 GLOBAL RETAIL STREETS*(USD PER SQUARE FOOT PER YEAR)

REGIONAL RETAIL RESEARCH CONTACTS

AMERICAS

> Ann T. Natunewicz [email protected]

EUROPE/MIDDLE EAST/AFRICA

> Zuzanna Baranowska [email protected]

ASIA

> Simon Lo [email protected]

AUSTRALIA/NEW ZEALAND

> Nora Farren [email protected]

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


Budget Highlights | Real Estate

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

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.

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.

MARKET REACTION TO BUDGET

Q1 2012 | RESEARCH

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

Company Change (%)BSE SENSEX -1.19Realty Index -1.26Anant Raj Inds -6.04D B Realty -2.02DLF 0.15Godrej Properties -2.82HDIL -5.21Hubtown Ltd. -4.13Indiabulls Real Estate -1.95Mahindra Lifespaces -0.72Orbit Corp. -3.37Parsvnath Developers -4.04Peninsula Land -3.18Phoenix Mills -2.65Sobha Developers 3.04Sunteck Realty -1.13Unitech -1.68

UNION BUDGET 2012 -13

A SNEAK PREVIEW

P. 1 | COLLIERS INTERNATIONAL

STREET/PRECINCT

RENT

(USD)**

ANNUAL

CHANGE

(%)

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-Élysées

Hong Kong - Causeway Bay

||,||| ||.|

New York – Madison Avenue

|||| ||.|

Milan – Via Monte Napoleone

|||| (|.|)

Sydney – Pitt Street Mall |||| (||.|)

HIGHLIGHTSGLOBAL

www.colliers.com

MID-YEAR 2012 | RETAIL

ANN T. NATUNEWICZ Manager | Retail Research | USA

Colliers’ 2012 Global Retail Streets survey found that of 129 locations tracked, 51 posted higher year

Retailers entering new markets—both developed and developing—continue 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, suggest-ing, 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

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

More than two years post-recession, though, results from our annual survey of High Street rents illustrate that the world’s 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 economically—Australia,

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 investorthey 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.

Record Rents for Top Retail Corridors; Global

Slowdown Impacts Momentum Elsewhere

TOP 10 GLOBAL RETAIL STREETS*(USD PER SQUARE FOOT PER YEAR)

REGIONAL RETAIL RESEARCH CONTACTS

AMERICAS

> Ann T. Natunewicz [email protected]

EUROPE/MIDDLE EAST/AFRICA

> Zuzanna Baranowska [email protected]

ASIA

> Simon Lo [email protected]

AUSTRALIA/NEW ZEALAND

> Nora Farren [email protected]

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

RESEARCH TEAM

Amit Oberoi MRICSNational Director, Valuation & Advisory; ResearchEmail: [email protected]

Surabhi Arora MRICSAssociate Director, ResearchEmail: [email protected]

Sachin SharmaAssistant Manager, ResearchEmail: [email protected]

Heliana ManoAssistant Manager, Research Email: [email protected]

For general queries and feedback:[email protected] Tel: +91 124 456 7580

United States: 147 Canada: 37 Latin America: 19 Asia PEMEA: 118

$1.8 billion in annual revenue 2.55 billion square feet under management

Over 12,300 + professionals

Surabhi Arora MRICS

Associate Director, [email protected]

For service line information contact:

Joe VergheseManaging [email protected]

Amit OberoiNational DirectorValuation & Advisory [email protected]

Saacketh ChawlaNational DirectorProject [email protected]

Rajesh ShettyNational DirectorFacilities [email protected]

Suresh CastellinoNational DirectorInvestment Services [email protected]

George McKaySouth Asia DirectorOffice & Integrated [email protected]

Poonam MahtaniNational Director Residential [email protected]

Vikas KaliaNational DirectorOffice [email protected]

This document has been prepared by Colliers International for general information only. Colliers International does not guarantee warrant or represent that the information contained in this document is correct. Any interested party should undertake their own enquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damage arising directly or indirectly there-from.

@ Copyright 2013-2014 All Rights Reserved.