Real estate, infrastructure receive a 'thumbs up' from Narendra Modi government

16-Jul-2014    |    Source:

Forty Five days into the formation of the Narendra Modi led Government, the Finance Ministry had an uphill task of presenting a budget that addressed the issues being faced by the Republic of India. While it would not be wise to expect everything that can be done or must be done, the citizens of India had been certainly waiting to hear the newly formed government’s plans to improve the economic situation of the country and to boost investor confidence.


While Mr. Arun Jaitley mentioned that that the last government’s commitment of reducing fiscal deficit to 4.1% is a tough task ahead of him, his budget , according to him is on path to reduce the deficit further to 3.6 per cent in 2015-16 and 3 per cent in 2016-17. Here ‘s a look at one of the key ingredient’s of his growth recipe.


Mr. Arun Jaitley’s maiden budget is a growth oriented budget with emphasis on improvement in infrastructure, manufacturing, quality educations, FDI in Defence to name a few with a greater focus on infrastructure and real estate .


The Finance Minister announced a sum of7,060 crore in the current fiscal towards development of 100 of Smart Cities i.e. satellite towns of larger cities to provide habitation for the neo-middle class. To further boost the development he announced a reduction in the FDI requirement from 50,000 square metres to 20,000 square and from USD 10 million to USD 5 million respectively with a three year post completion lock in.


Further, working towards the NDA government’s vision to provide affordable housing to all, Mr. Jaitley on behalf of the government proposed to allocate 4000 Crore towards development of Low Cost affordable housing. To encourage the younger population to invest in houses, the housing loan rebate on self-occupied property has been increased from Rs 1,50,000 to Rs 2,00,000.


The Finance Minister has further laid emphasis on the long pending Real Estate Investment Trust (REIT). This is a welcome move at a time when developers are facing huge liquidity crunch and high borrowing rate. (REIT) will help individual investors enjoy the benefits of owning an interest in the securitized real estate market. The greatest benefit will be that of fast and easy liquidation of investments in the real estate market unlike the traditional way of disposing of real estate.


Living up to ,if not exceeding, the expectations of the industry, the Finance Minister has announced several projects towards boosting the lagging infrastructure of the country. Infrastructure development is a key to meet the target growth of 7-8 % and the Narendra Modi led government seems committed to tread that path from the very beginning.


Continuing the success of the PPP model towards development of airports, ports and highways Mr. Jaitley announced setting up an institution to provide support to mainstreaming PPPs. Some of the proposed infrastructure plans include;


Allocation of 11,635 crore towards the development of Outer Harbour Project in Tuticorin for phase I.


Announcement of 4,200 crore towards a project on the river Ganga called ‘Jal Marg Vikas’ (National Waterways-I) between Allahabad and Haldia to cover a distance of 1620 kms


Investment of 37,880 crores towards construction of National Highways, Expressways and Industrial corridors.


Investment of 100 crore in the current financial year towards Metro Projects in Lucknow and Ahemdabad


Operationalizing of the Special Economic Zones(SEZ), to revive the investors’ interest to develop better infrastructure and benefit from the several tax benefits offered for SEZ’s


Adding to its commitment towards improving infrastructure in India, the government has ensured adequate flow of funds by raising the corpus of Rural Infrastructure Development Fund (RIDF) to 25,000 crores, and introducing Infrastructure Investment Trusts (InvITs), a modified version of the REIT’s.


Huge investment in real estate, infrastructure and construction will create several job opportunities, thereby reducing unemployment , will attract foreign investment and will be a part of the nation’s journey towards double digit growth in the next few years.

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