Hope for a bright future
With an aim to tame inflation, bring back growth in the economy and increase job creation, finance minister, Arun Jaitley has announced some vital measures in his first Union Budget for fiscal 2014-15. He specifically announced measures to boost growth in the real estate, construction and infrastructure sectors. All these sectors promise growth and contribute significantly to the overall economic growth of the country.
Let us take a look at the real estate sector. With an aim to provide housing for all by year 2022, the budget announced measures to make easier foreign direct investments (FDI) flow into the sector to provide additional tax incentives for group housing projects and cheaper credits for low cost housing for economically weaker sections (EWS). For providing cheaper credit flow, the budget made provision of `4,000 crore to set up a mission on low cost affordable housing to be anchored by the National Housing Bank.
The proposed reduction in built up area from 50,000m2 to 20,000m2, and minimum capitalisation from 10 million to five million will allow mid-sized and smaller developers with good track records better access to FDI and boost affordable housing in the country. Prior to the announcement, group-housing projects (apartment projects) are eligible for FDI if the total built-up area is at least 50,000m2. To further encourage this, projects which commit at least 30% of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalisation requirements, with the condition of three year lock-in. These measures will attract more developers towards affordable housing segments resulting in an increase in the housing supply.
Moreover, the proposed real estate investment trusts (REITs) if implemented will reduce the pressure on the banking system and make available fresh equity to cash starved developers. Most noticeably, allocation of `7,060 crore for the creation of smart cities will enable growth of housing across growth corridors.
At the individual taxpayer’s level, government has improved personal savings. By the enhancement of personal tax exemption limit by `50,000 to `250,000 from `200,000 and the increase of interest exemption limit on housing loan to `2 lakh from `1.5 lakh, the government has encouraged home ownership, especially among the youth.
On the construction and infrastructure side, the budget underlined the government’s focus on providing impetus to growth within these sectors too. While it addressed the importance of revisiting the public-private partnership model for infrastructure projects, it has also advised banks to extend long-term loans to infrastructure sector with flexible structuring to absorb potential adverse events. Additionally, various budgetary allocations to the National Highways Authority of India (NHAI) and the development of state roads, and to the Rural Infrastructure Development Fund are some of the highlights.
What does it mean for the country? Jaitley in his budget speech answered the big question: “Infrastructure and construction sectors have a significant role in the economy. Growth in these sectors is necessary to revive the economy and generate jobs for millions of our young boys and girls.” Various measures proposed in the budget will prove to be a harbinger of growth and will create millions of jobs and employment opportunities. But easier said than done!
The budget has prioritised the expenditure. Steps proposed are only the beginning of a journey towards growth. While I am certain that growth will be achieved, it is equally important that policy makers link higher education system in the country with specific needs of the industry. Focused and targeted education for these sectors would mean that the country will have more number of graduates who are trained to take on the task of nation building. But for real on ground execution, it requires stronger coordination between policy makers and the education providers.
• The author is MD of RICS, South Asia. He can be contacted by email at email@example.com