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 In legal parlance, jury duty means that you have the privilege to serve on a panel with 11 other peers to judge the actions of a fellow citizen. But we are not talking legal here. However, we do have the necessary 12-member jury. These jury members have been carefully picked out for the 4th Construction Week India Awards that will be held on September 19, 2014. Carefully because the nature of the awards demands that the jury should be well versed in the construction and infrastructure sector. That was the prime criterion. They must be engaged in this sector and discerning men or women who have made a career in this field.
Our 12-member jury comprise the crème de la crème of the industry some of who have been associated with us in the past. They are respected and well known men (yes, an all men jury) in the industry. Considering that the last day for sending in nominations has been fixed for August 30, the jury meeting has been scheduled for September 10 in Mumbai.
Being at the helm of affairs in the construction and infrastructure industry is no small feat. There’s a constant outpouring of news and regulations that keep coming in. The recent budget, for instance, had much to offer for this sector. CW India conducted a round table with the jury members to understand their views on the repercussions of the budget on the infrastructure and real estate sector.
Anil Sawhney, associate dean, director and professor school of construction, RICS School of Built Environment, says, “Ultimately the new government sees real estate and infrastructure as a crucial part of their development oriented growth model and mechanism to create millions of jobs and employment opportunities. It has, in fact, laid the roadmap for growth of real estate and infrastructure sectors in the country by budgetary allocation of funds and planning the expenditure for these segments.”
Prem Nath, founder of Prem Nath & Associates says that it’s probably the first time that affordable housing has been defined in terms of value and should increase the demand in the market.
The infrastructure and manufacturing sectors have been given paramount importance in the latest budget, since these are job-creating verticals. “Banks will now be encouraged to extend long-term loans for infrastructure projects without any regulatory pre-emptions such as CRR, SLR and priority sector lending norms. This additional enforcement of banks will consequently benefit the real estate sector too,” says Anuj Puri, chair- man & country head, JLL India.
Numerous initiatives have been an- nounced. “The allocation of Rs7,060 crore for the creation of 100 smart cities across India’s growth corridors will boost the economy and bring opportunities for real estate developers, investors, end users and well as the housing loan sector,” says Ashish Rakheja, regional MD, Aecom India. In keeping with the larger vision of creating smart cities and housing for all, the government has proposed the reduction in built-up area of projects from 50,000m2 to 20,000m2.
The construction industry is the second largest industry in the country after agriculture accounting for 11% of India’s GDP. McKinsey predicts rapid urbanisation growth, wherein by 2030, the population in cities is expected to touch 590 million, with more than 13 cities expected to have population exceeding four million and six cities with over 10 million people. “Hence, real estate sector presents India with a unique opportunity to make excellent progress in the country’s effort to improve its environment and has all the potential to lead the way for sustainable buildings,” adds Rakheja.
Sustainable buildings are a concept whose time has arrived in India. All new projects, especially the public sector one and the large ones, are already being developed as sustainable/eco-friendly projects. As a consumption-driven economy that is consistently falling short of delivering the required resources (in terms
of energy, raw materials, and few other utilities), a beginning must be made towards planning for resource consumption in a sustainable way. “These projects are being taken care of not just on the design side, but also in terms of materials and energy by way of code compliance. Most companies are taking care that new equipment being manufactured are eco- compliant,” says Prem Nath.
In terms of infrastructure building process, the public and private partnership model has so far been propagated often by government officials. “This model increases accountability, measures dead- lines and creates fund availability which can together hasten the procedure for infrastructure building. India has emerged as one of the largest PPP markets in the world and initiatives like development of new airports in Tier 2 markets using this model will provide a massive boost to the overall economy of the country in terms of infrastructure,” says Gulam Zia, executive director (advisory, retail and hospitality), Knight Frank India.
Infrastructure is a must for progress. A poor infrastructure is a barrier to progress. Allocation of funds for road development connecting rural areas to big cities opens up avenues for development. “The model of PPP is ideal for Indian scenario as it lessens the financial burden on the state exchequer and hurries up completion of projects as private parties are eager to recover their investments. A major drawback is that the state should be more responsible
to approve projects faster and provide statutory clearances. Here, what also matters is the issue of land acquisition and the state governments might need to look into that,” says Mukesh Jaitley, head, projects, Wadhwa Developers.
"If we follow the recent developments, there is a clear urgency for infrastruc- ture to live up to its role as a catalyst for the economy. There are several projects that have either been approved by the government or are approaching clear- ance. These include the DMIC (Delhi Mumbai Industrial Corridor) that will pass through six states and nine mega industrial zones which will impact manufacturing in a big way. The government has also cleared the way for National In- vestment Manufacturing Zones (NIMZ). Alongside, the budget has allocated an investment of over Rs37,000 crores in national and state highways and approved new airports and 16 new ports," says Vikram Goel, CEO, HDFC Realty.
In the current Budget, the finance minister has provided for creation of world-class convention centres through the PPP mode. These convention centres will make India a favoured international destination thus boosting corporate tourism, says Neerav Parmar, chairman (Mumbai Centre), Builders Association of India (BAI).
Simultaneously, there is a consensus among jury members on the decision to allow listings of real estate investment trusts (REITs) in India as an investment product. Most agree that it will boost the liquidity situation of cash starved developers and construction companies who are struggling to find funds for their construction activities. “While REITs will provide investors an investment avenue, its implementation will give them easier exit routes along with regular income in terms of returns,” says Sawhney. However, there is a caveat. REITs must operate via an SPV (special purpose vehicle). In this model of operation, a REIT is entitled to taxation on dividend distribution at
the hands of the SPV, after which the amount comes to the REIT and is there- after distributed to investors. “This dividend distribution tax rate (DDT) could make many REIT structures unviable or unattractive investment schemes. The centre must compare structures for REITs in countries such as Singapore and Hong Kong, and make an effort towards creating a structure in India that is equally (if not more) competitive,” says Puri.
However, the introduction of REITs will require the adoption of international valuation standards for evaluating the asset value for the computation of the returns. This would require expert valuers and professionals who bring professionalism in its implementation. By institutionalisation of standards and linking capital to adoption of these standards, structured financing can easily be implemented for the sector.

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