Increased Infrastructure Spending will Benefit Real Estate

July 8, 2009	(Be the first to rate this story!)  Loading ...
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While most real estate developers were disappointed with the Budget, a few realtors and global property service provider Jones Lang LaSalle (NYSE:JLL) Meghraj stated that increased infrastructure spends would indirectly benefit real estate. Mr Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj, said, of late, increasing number of infrastructure projects had a real estate component by virtue of a cross-subsidisation principle. Therefore, boosting infrastructure projects would give an impetus to real estate.

Similarly, a higher allocation to NHAI (National Highways Authority of India) would ensure improved and accelerated connectivity, which in turn would raise the value of real estate along the routes and open up new areas for development. A larger allocation for Jawaharlal Nehru National Urban Renewal Mission (JNNURM) was also good news for urban infrastructure. The programme has been instrumental in improving road and rail connectivity in urban and suburban areas, and this would boost mass housing schemes on the fringes of the metros. A higher outlay for the rural electrification scheme, besides rural housing fund and roads might serve to improve the realty markets in far-flung areas and help reduce inward migration from the villages by providing industrial growth in the hinterlands.

On the negative side, Mr Puri said STPI (Software Technology Parks of India) units would have a higher burden of Minimum Alternative Tax (MAT). This was an indirect endorsement of SEZs, and in line with the Government’s stance to phase out benefits to STPI projects, thereby encouraging migration to SEZs. Mr Pradeep Jain, Chairman, Parsvnath Developers, said though it was a non-event Budget specifically for the real estate sector, there were certain announcements which would indirectly support the sector. The Budget provides stimulus worth Rs 2,000 crore to the rural housing which was a welcome move as it would complement efforts to provide good quality housing in rural India.

Refinancing 60 per cent of commercial bank loans for PPP projects in critical sectors by IIFCL would infuse liquidity in the system and boost infrastructure development. Increase in allocation under JNNURM by 87 per cent to Rs 12,887 crore would be instrumental in reviving the urban infrastructure. The total excise duty exemption from pre-fabricated concrete slabs would help reduce the cost of construction in projects using pre-fabricated materials.

Mr Kapil Wadhawan, Vice-Chairman and Managing Director, Dewan Housing Finance Corporation Ltd, said the Budget clearly focused on improving rural housing and developing infrastructure in urban and rural India. The allocation of Rs 2,000 crore for Rural Housing Fund through the National Housing Bank to boost the resource base of NHB for refinance operations in rural housing was a significant announcement and would help organisations such as DHFL, which primarily focused on the lower and middle-income segment. The Confederation of Real Estate Developers Association of India said it was utterly disappointed, particularly because the Budget completely ignored the substantial contribution of the housing and real estate sector to GDP and employment of 10 million workers, which was second only to the agriculture industry.

Mr Kumar Gera, Chairman, CREDAI, said he was also upset as the real estate sector that has an impact on over 200 services and industries, with forward and backward linkages, had been let down. However, referring to the allocation for JNNURM scheme and enhancement outlay for housing and provision of basic amenities to urban poor, he said it would provide some relief through Government authorities without much participation by the private sector.

News Published Under:   Real Estate India, Real Estate Developers |

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