Realty firms in India are recovering from a slump that saw prices drop 25-30 percent, hope tax sops are extended to boost construction of affordable homes, but eye more benefits from an anticipated push to infrastructure and easier income tax regime. In the last eight months, lower prices and cheaper bank loans have spurred home sales, but an interest rate hike could dampen sentiment. Despite a string of government efforts to ease concerns, rising prices are posing a big challenge for the government, particularly high food prices, and they may prompt the Reserve Bank to raise interest rates even before April. The BSE real estate index rose 20.22 percent from July to December 2009, much in line with the main index, which rose 20.5 percent. This year till the close of Feb. 18, the BSE real estate index fell 14.36 percent, while the main index was down 6.5 per cent. Developers get income tax benefits under section 80-IB on housing projects with small houses (upto 1,000 square feet in metros and 1,500 sqaure feet in non-metros) that have to be completed within four years of obtaining approvals. The section introduced in 1998 was extended many times and as of now approvals cleared in 2008 are eligible and developers want to extend that to 2012.Bangllore is in a completely opposite swing. It is the undisputed first choice for all IT/ITES companies and with the outsourcing of services (BPO’s) in full blast we have witnessed a boom in the city’s economics over the last two decades. Major real estate players in Bangalore are moving towards more sophisticated technological solution and are also trying to establish a good online presence. The exploding software job market, handsome salaries and the easily available home loans have helped the real estate market to rise meteorically from the recession slump in the last 2 years.
The sudden demand for homes has led to a scramble for construction especially in the South, East and Central areas of Bangalore. The rates in certain locations like Whitefield, Sarjapur road, Outer Ring Road, Bannerghatta Road, Hosur Road have spiraled at an alarming rate .Whitefield for example has seen a 100% increase in land rates in just over a year. This construction boom should continue for the next year and a half at least and with the FDI’s opened up, there could be a spurt in construction in suburban Bang alore, and the city could witness some high quality, fast-paced development on the outskirts. This should eventually even-out the demand and supply, and we could witness a stabilizing of rates across the city, which would be welcome as the rates of homes are fast getting out of reach.