Roads, Construction and Real Estate Sectors to Get More Budgetary Allocation -

Roads, Construction and Real Estate Sectors to Get More Budgetary Allocation

India’s infrastructure spending will have to increase by Rs 50lakhcr in the next four years in order to improve its economic growth (majorly, delivery of goods and services). Infrastructure as a sector is also crucial for employment generation. Infrastructure spending was 7% of GDP during 2008-12, which fell to 5.8% of GDP during 2013-17 (as estimated by Niti Aayog). Decline in infrastructure spending can be attributed to high cost of capital, high level of stressed assets leading to slowdown in funding from financial institutions, land acquisition issues and slowdown in the economy, as per the news records.

Reports added that the roads and construction are major drivers of infrastructure growth in India. During FY08-12, Rs 5.4 lakh crore was invested in roads and urban infrastructure. The Niti Aayog estimates Rs 8.5 lakh crore to be invested over FY13-17 on roads and construction. The budgetary allocations to key schemes in housing, rural connectivity, digital connectivity, metro projects, waterways, sanitation, urban & rural infrastructure, irrigation, rural electrification and social development went up by 85% in FY18 compared to FY17. For the road sector, finance minister has allocated Rs 67,000cr for the national highways in 2017-18 as compared to Rs 57,676cr in 2016-17. Similarly, the budgetary allocation to roads were increased by 12% in the same period. The Central government in October, 2017 relaunched the Bharatmala Pariyojana (BMP)—an initiative to add 35,000km of new highways (subsuming existing plans to add 10,000km of national highways) with an outlay of Rs 5.35 lakh crore over the next five years—to raise investments in infrastructure, and boost economic growth. An additional Rs1.57 lakh crore is set to be used in existing projects. Thus, overall the Union government is set to spend around Rs6.92 lakh crore on roads over the next five years. National Highways Authority of India (NHAI) has also revised the highways award target to 10,000km for FY18 from a previously set target of 6,500km. Although its highway construction target has not been revised from 3,500km. The gap between award and construction was more than 4,000km during 2015-16, while it was more than 8,000km during 2016-17. India has been constructing highways at a rate of 27-28km per day, with the aim of speeding up the construction rate to 41km per day.

The real estate sector got its own regulator from May 1, 2017, the date when the Real Estate (Regulation and Development) Act, 2016 (RERA) became effective in the entire country. Each state and Union Territory will have its own Regulatory Authority (RA), which will frame regulations and rules according to the Act. The new rules call for a much stricter compliance and transparency, which may push the real estate prices up especially for the new launches, the large amount of inventory overhang in the system, will probably keep the price rise at bay until the supply gets over. Small and mid-sized property firms are struggling to raise funding for projects under RERA.

Real estate investment trusts (REITs) can increase the depth of the real estate market by offering a new asset class for investors as well as provide a credible exit route for existing investors and developers. They have the potential to enhance the supply of commercial real estate an enabler for the employment ecosystem. REITs have received regulatory approval. Foreign direct investment norms have also been relaxed so as to provide low cost financing for the sector.

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