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Construction : Union Budget | July 2014 | Source : Construction Update

The Budget boost

With the prime focus on stimulating a waning economy, Arun Jaitley, Union Finance Minister, presented his maiden budget before an expectant nation. In a macro sense, he emphasised on redressal of structural problems of the Indian economy and added that fiscal prudence would lead to fiscal consolidation with an aim to attain a sustained growth of 7-8 per cent over the next three-four years. CW presents sector specific highlights of the budgetary announcements:

Smart cities

An outlay of Rs 7,060 crore for 100 smart cities, will definitely enthuse several stakeholders including urban planners, city administrators and developers to come forward and give shape to sustainable models for new cities. Since the smart city concept on the whole is a nascent development, it will be prudent for all stakeholders to take insights from the planners of a few smart city initiatives such as the Gujarat International Finance Tec (GIFT) city, Delhi Mumbai Industrial Corridor (DMIC) and Naya Raipur. Conceptualising and developing new cities is a time consuming process; this announcement will give the required thrust to fast track more such new cities.

Urban infrastructure

The Government has encouraged further momentum in Metro projects, by setting aside Rs 100 crore for Lucknow and Ahmedabad. This should lead to less congestion while commuting to work in cities. It will be a win-win scenario for the two million plus cities as these start planning for Metro rail. Besides, it brings a range of opportunities not only for EPC contractors but also for international vendors. The Government has also set aside Rs 50,000 crore for municipal debt management in urban infrastructure and Rs 3,600 crore for drinking water programme. All these offer more opportunities for EPC contractors and pipe manufacturers.

Real estate

With Rs 4,000 crore, the Budget has proposed low-cost housing for young citizens along with an allocation of Rs 4,000 crore for affordable housing via National Housing Bank (NHB) and housing for all by 2022. This will create a favourable environment and boost affordable housing in the country. Meanwhile, plans to build 100 new cities, corporate social responsibility (CSR) status for slum redevelopment programmes, pass-through status to Real Estate Investment Trusts (REITs), are other major announcements that will kick start revival of the real estate sector. In addition, revival of SEZs and creation of industrial smart cities are other welcome announcements.

The exemption limit for interest on housing loans has been increased from Rs 1.5 lakh to Rs 2 lakh. This will revitalise the real estate sector, which has been suffering from low demand in the recent months.

Road sector

The ailing road sector was in the dire need of a real push and the proposals in this Budget are quite timely. With an allocation of Rs 37,800 crore for National Highways and State Highways, which includes Rs 3,000 crore for the North Eastern region, the FM has provided added confidence to private infrastructure developers. With NHAI targeting 8,000 km of road projects in FY15, most of this will come through the EPC route.

Finance

Last but not the least, here are some positive news for infrastructure finance. The announcement to set up an infrastructure investment trust to securitise projects and long term infra funds that will not be subject to regulatory needs of SLR and CRR have brought cheers to private infrastructure developers. These coupled with an allocation of Rs 12,000 crore for NHB and proposed infusion of Rs 2.4 lakh crore in PSU banks, the infrastructure sector will get the much-needed momentum. This move is positive for sectors such as roads, power and housing as PSU banks were going slow on funding projects.

(Watch out this space for more such post Budget analysis and insights.)
 
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