Property prices are consolidating: Anuj Puri

Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj talks in detail about the realty sector with Puneet Wadhwa. He also talks about porperty as an asset class and the likely impact on prices going forward?

Has the Union Budget 2010-11 done enough for the realty sector? What are the implications of the proposals on service tax?

This is a positive, growth-oriented Budget – and growth in the economy always equals growth for the real estate sector. Because of the overall economic growth implied in the enablement by this Budget, we have no overt complaints on behalf of real estate.

The positive revision in personal income tax rates will put more money in the pockets of the middle class, thereby increasing the buying power and sentiment of home buyers. We would have been even more grateful for the re-introduction of the 80 IB (10) tax benefit scheme, first implemented in 2001, which was definitely a boost for developers of affordable housing. Nevertheless, the fact that existing incentives continue to be in place is positive.

There is, however, a downside to bringing all lease agreements pertaining to commercial property, including offices, business centers, shop and malls, cold storage facilities and warehouses as well as all other premises used for business purposes under the purview of service tax. It represents an additional layer of cost owners, which they will tend to pass on to tenants.

Is it the right time to invest in property as an asset class?

Provided one chooses the asset type and its location carefully and has a long-enough investment horizon, yes. Investors with a long-term view should continue to include property in their investment portfolios. Real estate still remains a good long-term risk diversifier that has the potential to generate very satisfactory risk-adjusted returns for serious long-term investors.

In terms of opportunities, the current scenario presents excellent bargains for investors, as well as to those who have a medium-to-long term view on the industry and the necessary risk appetite. Much will depend on being bang on target in terms of location, product and entry valuation.

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