Budget 2016: Budget paves the way, literally

Identifying physical infrastructure-building as one of the key sectors requiring immediate attention of the government, Finance Minister Arun Jaitley focused mostly on the road sector where he talked of enhanced allocation and solving the problems of private concessioners. For the housing sector where there were incentives galore, both for the developers as well as buyers.

Statistics were on display to prove the government's seriousness about the road sector, since the general impression was that construction of roads wasn't happening fast enough: Out of Rs 2,18,000 crore outlay on roads and railways in FY17, Rs 55,000 crore would be allotted for roads while another Rs 15,000 crore will be be raised by National Highways Authority of India (NHAI) through bonds.

"Accordingly, the pace of construction, which is currently 100 km per day, as compared to the average of 73.5 kms during 2011-14, will be substantially stepped up," the Finance minister said.

"Enhanced allocation in road and highways sector by around 22% is definitely a positive. However, the role of private sector investment would be key to achieving the target of 10,000 km of National Highways construction during FY17. Therefore, two initiatives such as Public Dispute Resolution Body and Guidelines for renegotiation of Public Private Partnership (PPP) contract are important to provide necessary impetus to the PPP model of procurement in roads and highways sector which has suffered due to disputes and litigations," said Vikash Sharda, Director, Infrastructure at PwC.

Would the figures on Budget papers are of any solace for the road developers, whose money is stuck in unviable projects and in disputes?

"We don't see any extraordinary impact of the Budget coming through. Last year there was a lot of emphasis on infrastructure sector but we haven't seen much difference on the ground. Many of the projects that are stuck are not viable as many a time, assessments were not done properly. The government need a take a hit in these cases," said Sunil Jha, managing director, Shristi Infrastructure development Corp, which has exited its road projects as the sector has turned unprofitable for it.

To bring back private players like Shristi, who have exited the sector, government would be bringing in a Public Utility (Resolution of Disputes) Bill to "streamline institutional arrangements for resolution of disputes in infrastructure-related construction contracts, PPP and public utility Contracts". Additionally, there would be guidelines for renegotiation of PPP concession agreements, a major reason why many of the road projects are stuck.

On a lighter side, with new roads getting paved, profitable or not, it's the cement sector that would be laughing all the way to the bank.

"With 85% road projects coming back on track and 50,000 km of state highways to be taken up for upgradation as national highways, we expect to see a boom in the demand for cement," said Amandeep, Director & CEO of cement maker OCL India.

But it's the housing sector that takes the cake. Service tax exemption on construction of affordable houses up to 60 square metres; deduction for additional interest of Rs 50,000 a year for loans up to Rs 35 lakh sanctioned during the year for first-time buyers and exemption of excise duty on ready-made concrete would majorly revive the sector, particularly the affordable segment.

But a key incentive would be full deduction allowed for profits from housing projects for apartments up to 30 sq metre in four metro cities and 60 sq.metres in other cities. "Giving 100% exemption on undertakings from housing projects in cities between June 2016 and March 2019 might be the biggest joker in the pack for real estate from this budget," said Rishi Jain, executive director of real estate developer, Jain Group.