Indian Budget 2018 for Construction sector
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Indian Budget 2018 Highlights for Construction, Real Estate & Infrastructure Sector

  • India needs investment of Rs 50 lakh crore in the infrastructure sector
  • Construction of new tunnel in Sera Pass to promote tourism
  • Out of 100 smart cities 99 cities have been selected, with an outlay of Rs 2.04 lakh crore
  • 10 prominent tourist sites will be made iconic tourist destinations, with an amalgamation of private funding, marketing and branding
  • Bharatmala project: To develop 35,000 KM under phase 1 with an outlay of Rs 5.35 lakh crore
  • Govt to introduce pay-as-you-use system for toll payments

Union finance minister Arun Jaitely raised budgetary allocations to infrastructure sectors by 25% in Budget 2018 but refrained from making any new project announcements.

In the year 2018-19, for creation of livelihood and infrastructure in rural areas, total amount to be spent by the ministries will be Rs 14.34 lakh crore, including extra-budgetary and non-budgetary resources of Rs 11.98 lakh crore,Infrastructure development has been one of the focus areas of the Narendra Modi government. Starting with an allocation of around Rs1.81 trillion in 2014-15, expenditure towards infrastructure reached Rs4.94 trillion in 2017-18.

The government and market regulators have taken necessary measures for development of monetizing vehicles like Infrastructure Investment Trust (InvIT) and Real Estate Investment Trust (ReITs) in India. The government would initiate monetizing select CPSE (central public sector enterprises) assets using InvITs from next year,” Jaitley announced.

As part of the new integrated infrastructure planning model, the National Democratic Alliance government unveiled the largest-ever rail and road budget of Rs1.48 trillion and Rs1.21 trillion, respectively in 2018-19.

Jaitley said that during 2017-18, the cabinet approved the ambitious Bharatmala (roads) scheme to strengthen the roads network, for which the government will raise Rs5.35 trillion as equity from the market. India needs funds for ambitious plans such as Sagarmala (ports) and Bharatmala to improve its transport infrastructure.

NHAI will consider organising its road assets into special purpose vehicles and use monetising structures like Toll, Operate and Transfer (TOT) and Infrastructure Investment Funds to raise equity from the market for its mature road assets, Apart from creating infrastructure for sea-planes to boost connectivity, the push will also be towards the government’s regional connectivity scheme that has already connected 16 new airports and aims to connect 56 unserved airports and 31 helipads.

The scheme, Ude Desh Ka Aam Nagrik (UDAN), which loosely translates to “Let the common man fly”, proposes that at least half the seats on every flight should have a fare cap of Rs2,500 per seat per hour of flying.

Budget 2018 levies Rs8 per litre road and infrastructure cess to raise funds, state-owned firms to tap equity and bond markets for more resources

In Budget 2018 the government continued to put more focus on infrastructure development as they allocated Rs 5.97 lakh crore towards the infrastructure development.

Finance Minister Arun Jaitley has allocated an extra-budgetary support of Rs 5.97 lakh crore against Rs 3.96 lakh crore in the budget 2018 for the infrastructure sector. Construction companies like KNR Construction, J Kumar, NCC to play infrastructure theme from the budget.

With Jaitley promising record infrastructure spending on roads and railways, construction and engineering firms, as well as train wagon-producers, could benefit. That includes Larsen & Toubro Ltd., Hindustan Construction Co Ltd., NCC Ltd., IRB Infrastructure Developers Ltd., Dilip Buildcon Ltd., Titagarh Wagons Ltd., and Cimmco Ltd.

With the government pledging to expand regional airport construction, firms such as GMR Infrastructure Ltd. and GVK Power & Infrastructure Ltd. could benefit.

Dinesh Rohira, Founder & CEO, said, “With government allocating over Rs. 1.48 lakh crore for railway projects and Rs. 14.34 lakh crore for rural infrastructural spread across various scheme under its infrastructural theme, the company engaged in construction and housing segment coupled with company engaged in railway and road project is expected to get boost.”

Budget 2018:The targets for construction of houses under the Pradhan Mantri Awas Yojana (PMAY) for 2018-19 were also outlined. Under the PMAY (Gramin), 49 lakh houses will be constructed and the outlay for the programme stands at Rs 33,000 crore.

The government will set up a dedicated fund for affordable housing. “My government will establish a dedicated affordable housing fund (AHF) in National Housing Bank, funded from priority sector lending shortfall and fully serviced bonds authorised by the Government of India,” said finance minister Arun Jaitley in his speech.

The targets for construction of houses under the Pradhan Mantri Awas Yojana (PMAY) for 2018-19 were also outlined.

Under the PMAY (Gramin), 49 lakh houses will be constructed and the outlay for the programme stands at Rs 33,000 crore. Of this, Rs 21,000 crore will come in the form of gross budgetary support, while the rest will be funded through extra budgetary resources.

The budgeted estimate for the capital outlay under the PMAY (Urban) programme is Rs 31,500 crore. Of the total outlay, a chunky Rs 25,000 crore is to come from internal and extra budgetary resources, while the rest will be provided as GBR.

A recent Reserve Bank of India report says while the total disbursement of housing loans by public sector banks and housing finance companies decreased in FY17, there was significant growth for lower slabs. In the below Rs 10-lakh category, housing loans worth Rs 42,990 crore were disbursed that year, up 23% from FY16. The Budget announcements are expected to add to the buoyancy in the segment.

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