#Budget2017: Regulation Of Construction Material, Reducing Construction Cost Are The Key Areas To Focus On

To elevate the real estate industry, in the Union Budget 2017, finance minister Arun Jaitley should announce policies to regulate construction materials, direct-indirect benefits to the construction industry, which includes clarity over GST as which tax rate is applied to the real estate and construction industry. Any policies or schemes in the field of infrastructure (roads, railways, etc.) and industries (refineries, pipelines, etc.) will also directly uplift the construction industry.

Post-demonetisation, people are facing a lot of challenges, but, the future seems positive for the construction industry. Real estate construction has a very high intensity of about 0.8x, which means that for every rupee spent on construction, 80 paise gets directly added to the economy.

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The government should think of imaginative and workable solutions on reducing the cost of construction in the face of rising input costs. As construction costs account for a significant portion of the selling price of affordable housing units, the policy announcements should raise the positive sentiments among the consumers and developers too.

Already announced policies

• Smart Cities Mission
• AMRUT
• HRIDAY

These initiatives by the government will directly boost the construction industry of India. The betterment of existing cities and development of new townships will fuel the allied sectors.

The government's 'Housing for All by 2022' will act as a key game-changer for the construction industry. A bigger push to the creation of affordable housing mission, along with faster approvals and other supportive policy changes will result in a rise in the construction activity. All in all, it will bring increased activity in construction and related sectors.

Also read: #Budget2017: Housing Scheme With 6-7% Home Loan Interest Rate On The Cards

FDI policy

Norms for FDI in real estate and construction development have been eased, and this has very positive implications for these sectors to grow further and will benefit both developers and end users.

Under FDI policy, development of projects, which include townships, housing complexes, road, highways or bridges, hotels, hospitals, educational institutes, etc., - 100 per cent FDI through automatic route is permitted. Presently, the 100 per cent FDI is allowed for urban infrastructure only, subject to relevant rules and regulations. This year's budget may address policies that will have some direct-indirect emphasis on rural infrastructure.

There is also 100 per cent FDI allowed under automatic route for the industrial park.

Policy announcements should be made while keeping these key elements in mind:

• Higher rates of statutory charges and taxes tend to inflate the cost of construction, making affordable housing projects financially unviable for developers. This needs to be regulated for the success of affordable housing and other related schemes.
• Exemption from service tax on construction of affordable houses up to 60 square metres under any scheme of the central or state government, including PPP schemes, would help improve affordability.

As construction industry serves as a major driver in the affordable housing segment, the government should announce policies in the upcoming Budget, where urban local bodies (ULBs) and foreign players can jointly work for serving Indian better.

A lot more policies are expected in the Union Budget 2017, that will further ease out the business of construction industry. Realty players are expecting that Budget may include policies regarding low-cost housing schemes which will boost the residential construction industry.

Construction material

Real estate developers and other market players are expecting that Jaitley will announce policies on standardisation of major construction material. Through this policy, cement and other supporting industries can be controlled which is affecting the cost of housing to the end user.

Policies of infrastructure development will directly impact the construction industry as well. Thus, making it a key aspect in the upcoming Budget.

In last year's Budget, Jaitley extended excise duty exemption, which is presently available to concrete mix manufactured at the site for use in construction work to ready mix concrete as well. This needs to be extended further as well.