'PPP model to play a pivotal role'

The Union Budget 2015-16 has strongly indicated the government’s desire to move towards an annual growth rate of 8 to 8.5 per cent in the coming fiscal year.

The infrastructure sector has been the key focus for the Finance Minister in this year’s Budget. In total, the FM has proposed an additional Rs 70,000 crore towards infrastructure development which will provide a spurt for urbanisation, creation of new civic amenities, and enhancing road and rail network.

The FM also announced the establishment of a pre-defined permissions regime for quicker project approvals but this will only be effective if the same system is applied both at a national and state level. Also the allocation of Rs 22,407 crore towards urban development and housing, the bulk of which is expected to fund affordable housing and smart cities, is a welcome move.

It will be interesting to see how the PPP model is revitalised to make it easier for the private sector to participate, especially in the affordable housing segment where the intervention of the government is required for obtaining clear titled land parcels.

For a long time, home buyers have been at a disadvantage because of the double impact of high inflation and high interest rates. The FM has stated that under a monetary policy agreement with the RBI, the government shall work to keep inflation under 6 per cent, which should help the RBI bring down interest rates. This will benefit home aspirants to a great extent since loans will become cheaper.

Some long-standing demands of the housing sector have been overlooked, such as giving infrastructure status to affordable housing.

But the FM has announced that the National Housing Board will get a substantial chunk of the Rs 20,000 crore allocated towards creation of a national infra fund.

There was an urgent need to give a spurt to the Housing for all scheme and the FM has indicated that six crore urban and rural units will be developed under ‘Housing for All’ by 2022, details of which should be known in due course. However, the real estate sector could have benefited greatly if the FM had announced tax incentives for adopting green construction methods for all forms of housing.

The industry is also waiting for GST to come in, which will solve the problem of multiple layers of taxation on construction raw material. Rationalising the calculation of capital gain on REITs and Investment Trusts will help in establishing these products as mainstream investment instruments and will help in channelising investments in commercial real estate.

The Economic Survey expounded that “creative incrementalism” and not “big bang reforms” would help India achieve double digit growth. It will be interesting to see how the Finance Minister rolls out some of the systemic reforms suggested by him in the months to come.

From the point of view of personal income, the budget proposals may result in increasing the savings net for the common man by providing health cover, transport allowance and pension contribution. There is a proposal to create a Senior Citizens Welfare Fund for subsidising premia for economically vulnerable groups. Implementing a cap on cash transactions will help in greater transparency and curb the use of black money.
(The writer is Brotin Banerjee — Tata Housing Development Company Managing Director and CEO )