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Infra Sector Looks For the ‘Big Push’ From The Budget 2023

The infrastructure and real estate sector got a major push with the Smart Cities Mission. Since the mission worked on factors like better infrastructure, better waste and water management, integrated traffic management and safer cities with use of technology, the Tier II cities in India got upgraded. Industry members are now looking for a further boost to the sector in the union budget

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As the Union Finance Minister Nirmala Sitharaman will present the Annual Budget 2023 on 01 February, India’s infrastructure and real estate sector will be looking at her eagerly. The Smart Cities Mission gave a major boost to these sectors, making the TIER II cities get more prominence. As the Smart Cities Mission comes to a completion in June this year, the sector is now in a transformational mode.  

The infrastructure and real estate sector got a major push with the Smart Cities Mission. Since the mission worked on factors like better infrastructure, better waste and water management, integrated traffic management and safer cities with use of technology, the Tier II cities in India got upgraded. Industry members are now looking for a further boost to the sector in the union budget.

As Arindam Guha, government services leader at Deloitte India puts it, “As India continues its journey towards becoming a USD 5 Trillion inclusive economy, financing infrastructure development and climate friendly inclusive growth becomes extremely important.” Guha added that it is important to attract private investment in the sector through specific measures in the Union Budget 2023-24 for adequate financing of the Rs 111 lakh crore National Infrastructure Pipeline by 2025.  

Aaditya Sharda, Cofounder, Infra.Market said that the construction industry is increasingly focusing on research and innovation. “Encouragement from the government in the form of subsidies and incentives can go a long way in achieving success. A reduction in costs of key elements required in setting up infrastructure will provide great respite to players. Public-private partnerships can also help to augment digitisation and innovation in construction, further easing supply chain issues,” said Sharda.

Rahul Sharma, president of the Aluminium Association of India says that there is a strong need to address the bottlenecks of the domestic aluminium industry. “Aluminium will play a significant role in this effort with an extensive role in the success of the national vision on Net Zero emissions, renewable energy, sustainable infra, last-mile road & rail connectivity and encouraging the sunrise sectors of renewable energy & electric vehicles,” Sharma said.

He added that to achieve this goal, it is crucial that the bottlenecks of the domestic aluminium industry are addressed. “The current high duty structure of 7.5% - 10% on these essential raw materials is an investment deterrent & needs to be rationalized to at least 2.5%, if not removed completely. Similarly, even with the availability of sufficient capacities for the production of high-quality aluminium domestically, the dumping of low-quality imported scrap has restricted the development of the domestic scrap landscape. Imposing necessary quality standards & a duty of at least 10% on the import of aluminium scrap is necessary to prevent dumping of sub-standard foreign scrap in the country,” Sharma said.

Shiwang Suraj, Founder and Director, Inframantra said, "The government must provide extra incentives to promote affordable housing in addition to the standard requirements for single-window clearance and industry status for real estate. As this market sector also fits well with the government's Housing for All goal, there is now a need to promote the purchasers in this market."

The PM GatiShakti Scheme or the National Master Plan for Multi Modal Connectivity is also being touted as a plan that gives a major push to the infra sector. Abhishek Gupta, Vice President & Sector Head, Corporate Ratings., ICRA Limited said, “The capital outlay on infrastructure sector is expected to be witness healthy increase in FY2023 to achieve the targets set under the National Infrastructure Pipeline (NIP), and Gati Shakti national master plan. It is expected that major focus will be on key infrastructure segments like roads, railways and urban infrastructure. Dedicated allocations for specified large infrastructure projects announced such as High Speed Rail, Jal Jeevan Mission, Bharat Mala, Sagar Mala, Smart Cities, Inland Waterways development, amongst others is also expected which can help expedite these program. The infrastructure sector also expects measures to improve long-term funding availability for infrastructure sector including ramp-up in lending/investment by the newly set-up DFI – NaBFID and the NIIF, and incremental allocations towards these will be important from financing the NIP.”

Sneha Gurjar, Director, CEM Engineers said that the industry expects the thrust on infrastructure projects to continue in major cities. “We can expect the thrust on infrastructure projects to continue in major cities, with an increase in spending for railways, roads and port facilities. Moreover, a focus on the development of Industrial infrastructure is also expected, with many initiatives taking shape in the coming year. A push for cleaner energy alternatives can be expected in a much bigger way than witnessed earlier. Additionally, Photovoltaics will see more use in projects in the construction industry,” said Gurjar.  

With a boost in infrastructure, the manufacturing industry also hopes for some gifts. Brij Bhushan Agarwal, Vice Chairman and MD Shyam Metalics said, “We hope for an increased allocation for products from the steel sector to be covered under the PLI Scheme, giving the industry a much-needed boost. We also hope there is an increased focus by the govt. to scale up the infrastructure sector in the country which will have a positive domino effect for the steel sector. A good budget for National Highways will also translate into a positive for us which will further propel the growth of the sector. We expect the government to increase import duties on major metals to keep the imports in check.”  

The steel and cement manufacturers are looking at government interference to cap on prices of raw materials. Vedant Goel, Managing Director, Neo Mega Steel LLP said, “India hosting G20 will boost our economy. This year's budget will be one of the best budgets in India to grow and stabilize our economy. There are multiple government projects going on in this sector, which are on the verge of completion this year ie 2023. We are expecting a growth of 10% in infra 2023. For that to happen smoothly, we require government interference to cap on prices of raw materials in infra- specifically in steel and cement. A governing body focusing on raw material capping would be very advantageous.”

Rajeev Tanna, CFIRM Strategic Advisory Board of IRM India Affiliate said that the government could work on simplifying/enhancing coordination between various Centre and State Government entities/departments towards approvals for different aspects of the project including billing, collections, clearances, extensions, etc. "This will ensure timely delivery of the projects within quality parameters. A Project Management Group could be created to monitor the smooth execution of large-scale Infrastructure projects to minimize the projects getting stuck/delayed. Along with this, Government could promote the formation of Dispute Resolution Boards before tapping the Arbitration route to fast track issue resolution," Tanna said. 

The Smart City Mission and the consequent infrastructure development has been a big support to the real estate sector. Although the sector is still not a part of infra, it hopes for some boost in the Union budget. Atul Goyal, CFO, Brigade Enterprises said, “The real estate sector would greatly benefit if it is granted infrastructure status as this will promote greater transparency, boost investment and borrowing capacity. Additionally, it would help if stamp duty charges are minimized or subsumed under GST. We urge the government to consider reinstatement of the concessional GST rate of 12% on works contract services provided to the affordable housing projects till such time the projects obtain the completion certificate. For the benefit of exemption for investment made in two residential house properties, we urge the government to raise the current cap from ₹2 crore to ₹5 crores to boost the real estate sector."

Kaushal Agarwal, Chairman of The Guardians Real Estate Advisory said that the government has done good work through landmark initiatives like PMAY and the sector has high hopes for the upcoming budget. “The real estate industry will be able to draw equity investment, restructure its debt, and get loans at cheaper interest rates with the support of a long-pending request for ‘Industry’ status. Also, prices have risen due to ongoing crises, so we expect announcements on specific schemes such as a reduction in GST on under-construction properties and pricing of key raw materials in the Union Budget 2023-24,” said Agarwal.