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Housing
& Construction
Highlights
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Maximum amount of deduction available for interest payable
on housing loans increased from Rs.1 lakh to Rs.1.5 lakh.
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Longer tax holiday for companies in infrastructure projects
plus capital gains exemption on investments in infrastructure
related financial instruments
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Rural roads and National highway to receive top investment
priority
| Budget
Impact |
| Excise |
 |
Customs |
|
Policy
Tax |
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Increasing
the limit on deduction of interest payable on housing loans,
from 1 lakh to 1.5 lakh, will prompt more individuals to go
for housing loans, thus positively affecting the housing finance
sector, keeping in mind the large scale gap that has been
existing in rural and urban housing requirements.
On the
macroeconomy front, large scale infrastructure projects
are expected to be initiated. Firstly, tax holiday provisions
for infrastructure has been liberalised. For most of the
infrastructure projects, there is a tax holiday of ten years
which can be availed of consecutively out of twenty years
beginning from the year in which the undertaking begins
operating the infrastructure facility. For other projects
like ports, airports, inland port and inland waterways they
can now have a tax holiday that can be availed in a block
of fifteen years. The tax holidays should spur many large-scale
construction projects.
Large
scale construction and infrastructure projects will fuel
the demand for other related sectors of steel, cement, building
materials etc.
National
Highway Development programmes and development of rural
roads are yet another area to fuel demand for construction
activities. The total plan outlay for this sector has gone
up by 93 per cent and it is expected that there will be
large-scale participation from the state governments.
In building
material, white cement has been negatively affected by increase
in excise duty from 16 per cent to 32 per cent. Hindustan
Sanitaryware, EID Parry and other suppliers of glazed tiles
will be positively affected by reduction in their product
from 32 per cent to 16 per cent.
OutlookHousing
shortage currently stands at 7.2 million in urban areas
and 13.2 mn in rural areas. The sector was in recession
for few years in the mid Nineties, but started looking up
in the last three financial years following government's
policy initiatives. Real estate prices have bottomed out.
However, growth is expected to accelerate due to the freeing
of allocation norms for LIC and GIC. Government has also
repealed the land ceiling act, which will ensure supply
of land in urban areas and has also decided to allow private
participation, including FDI in housing sector.
Industrial
Construction segment is a function of industrial growth,
capacity utilisation and investment. Major contribution
is expected from power and petroleum sectors where several
units are coming up. Government has also given permission
to develop area bordering projects which could see several
commercial and service construction project coming up.
International
and domestic mergers and acquisitions are going to change
the equation in the long run. Government decision to open
infrastructure sector for private participation to achieve
rapid development on different terms like BOT, BOOT, BOLT
etc is an indication of the large scope that exists for
private construction companies.
| Voices |
| It
is a positive budget for the construction sector. Thrust
has been on both rural roads and highways and the concession
that has come in the form of tax holidays is definitely
going to help the sector.
Parvez
Umrigar, VP Finance and Development (Projects), Gammon
India Ltd
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