Monday, July 6, 2009

Infrastructure, real estate sectors expect a big boost Assetventures

NEW DELHI: The infrastructure sector and the recession-hit real estate sector are looking forward to the Union budget with great expectations. Both the sectors, which require huge investments, are expecting a big boost to revive growth and put them on the path of recovery.

The President’s address to Parliament has sought to give a big boost to the infrastructure sector, plagued by bottlenecks with slow movement in the development of ports, roads and airports. However, it is expected that apart from granting industry status to infrastructure, the budget will give impetus to investments in the sector.

Global consultant Goldman Sachs expects a leap in infrastructure spending, particularly on roads and ports. It is estimated that India will require $500 billion over the next five years in the sector to sustain the growth momentum. The budget is expected to give a big push to Public-Private Partnership (PPP) projects. Greater flexibility could be given to the India Infrastructure Finance Company Limited (IIFCL), which has been set up as a refinancing facility for infrastructure projects, to deploy funds.

Double the capacity

According to the Planning Commission, India may need to nearly double its capacity of ports, roads, power, telecom and airports to keep pace with its growth. Companies engaged in infrastructure development are expecting some relief for lenders to enable them to achieve financial closure of much delayed projects.

There is an expectation that the proposal to restore tax exemption under Section 10 (23G) could be introduced in the budget to be presented by Finance Minister Pranab Mukherjee on July 6. This Section allows tax exemption for investments in infrastructure, both via equity and debt.

The real estate sector is looking forward to relief for the housing sector, which has been reeling under the recessionary trend for the last few months. Real estate developers want interest rates lowered to make cheap loans available, which will give a boost to the housing sector and generate demand.


According to Rohtas Goel, CMD, Omaxe Limited, developers are facing acute liquidity crunch and facing difficulties in servicing debts. Restructuring allowed up to June 2009 has provided immense relief. As the recovery is likely to take more time, further restructuring should be allowed, wherever required.

Group housing and integrated township development should be brought within the definition of infrastructure and incorporated in the explanation under sub-section 4.

“The housing sector should be granted the status of industry for all concessions, rebates and easy finances,” Mr. Goel said.

Saviour Builders director Sanjay Rastogi says the budget should lower interest rates and recognise real estate as an industry. He feels strict norms should be introduced to control the prices of steel and cement to stabilise the industry.


The Royal Institution of Chartered Surveyors (RICS) said the government should increase the housing loan interest deduction limit to Rs. 2.5 lakh or Rs. 3 lakh per annum and lower interest rates to 7.5 per cent for loans in the range of Rs. 5 lakh to Rs. 30 lakh.

The RICS expected re-introduction of concessions under Section 80IB (10) of the Income Tax Act, encouraging construction of small units at affordable prices.

It expected waiver or reduction in stamp duty, value-added taxes and other government taxes for economically weaker sections and lower income group housing; restoration of tax holidays for low-cost housing projects; further relaxation of the external commercial borrowing and Foreign Direct Investment norms; and rationalisation of stamp duty and registration charges.

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