Service tax
Direct tax
Excise duty
Defenseexpenditure
Fiscal deficits
Subsidies
Government borrowings
Budget deficits
Indirec
t tax
Corporation tax
Income tax
Import duties
R
R
Expenditure
Good
s and
servi
ce ta
x
PRE BUDGET ANALYSIS REPORT REAL ESTATE
Kotak Securities - Private Client Research Please see the disclaimer on the last page For Private Circulation 33
PRE-BUDGET ANALYSIS February 15 2013
REAL ESTATE
Current view We expect Union Budget 2013-14 to be positive for the real estate sector.
Positives are likely to come from increased focus on Rajiv Awaas Yojana, IndiraAwaas Yojana and rural housing fund. This will benefit players focused on lowcost housing.
Sector also seeks industry status as it generates huge job opportunity and industrystatus would also enable easier lending for the sector. But we believe that it maytake a while before it is given an industry status.
Companies are also expecting expansion of interest rate subsidy net of 1%,which we believe can come through. Setting up of a real estate regulator tobring transparency in the sector may take some shape. Industry also expectsincrease in the income tax exemption limit and subsidized construction materialfor low-mid income housing segment which we believe may come through.
EXPECTED BUDGET IMPACT:Positive
LONG TERM OUTLOOK:Cautious
Implementation ofReal Estate Regula-tory Bill to improvetransparency,efficiency in thesector
Real estate Regula-tory Bill
Can be imple-mented
Draft bill pending since2009; it enhancestransparency and protectconsumer interest
Positive for thesector
Sector seeks industrystatus as it generatescountless jobs acrossits verticals andwould also enableeasier lending forthe sector
Industry status Status quomaintained
It may take a whilebefore it gets imple-mented
Neutral for thesector
Key budget expectations
Issues Industry wish-list Our expectation Rationale for our Impact of ourexpectation expectation
Increase the limitfrom Rs 1.5 lac to Rs4 lacs
Income tax exemp-tion limit on interestand principalrepayment
Can be enhancedto Rs.2 lacs
Provides benefit to homebuyers
Positive for thesector
Provisions forsubsidized construc-tion material for lowto mid-incomehousing
Subsidized construc-tion material
Can be imple-mented
Benefit home buyers inlow income groups
Positive for thesector
Industry expects asingle windowclearance to enablefaster execution ofprojects
Single windowclearance forprojects
Status quomaintained
It may take a whilebefore it gets imple-mented
Neutral for thesector
Enactment oflegislation on REITsto provide entry andexit opportunities forsmall investors
Legislation on REIT Status quomaintained
It may take a whilebefore it gets imple-mented
Neutral for thesector
Increased focus inachieving targets inthese scheme
Increased focus onRajiv Awas yojana,Indira Awaas yojanaand Rural housingfund
Increased focus Inline with government'splan to make countryslum free in next 5 years
Positive forplayers focusedon slumredevelopmentprojects
Kotak Securities - Private Client Research Please see the disclaimer on the last page For Private Circulation 34
PRE-BUDGET ANALYSIS February 15, 2013
Source: Kotak Securities - Private Client Research, Industry
Real Estate (contd...)
Top picks
Company Price EPS (Rs) PE (x) Recommendation(Rs) FY13E FY14E FY13E FY14E as per our last
report
PHOENIX MILLS 268 9.0 15.7 30.0 17.2 ACCUMULATE
Source: Kotak Securities - Private Client Researchrities - Private Client Research
Interest rate subsidyof 1% for loanstowards affordablehousing should beamplified andbroadened toinclude a wider priceband of budgethousing to benefithome buyers,especially in lowerincome groups
Interest subsidy netof 1% should bebroadened
Can be broadened It will benefit homebuyers in low incomegroups
Positive forthe sector
Key budget expectations
Issues Industry wish-list Our expectation Rationale for our Impact of ourexpectation expectation
Expects soonerimplementation ofGST
GST implementation Can be imple-mented
Streamline the economyand provide stimulus toGDP and hence to thehousing sector
Positive for thesector
Kotak Securities - Private Client Research Please see the disclaimer on the last page For Private Circulation 38
PRE-BUDGET ANALYSIS February 15, 2013
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Fundamental Research TeamDipen [email protected]+91 22 6621 6301
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