RICS applauds the continued focus and monetary boost provided to rural and urban infrastructure, housing and development
~ Increased expenditure allocation for rural and urban development will benefit the real estate and construction sector; no significant changes in direct and indirect taxes prudent steps in light of the deferred implementation of Direct Tax Code and GST to 2011~
Outlining its views on the Union Budget 2010-2011, the Royal Institution of Chartered Surveyors (RICS) commends the budget for its phased approach towards fiscal consolidation, envisaging a gradual lowering of the fiscal deficit by a moderate 1.4% to reach 5.5% in 2010-11 from current 6.9% and further decline of approx 0.7% each year through 2011-13.
Despite the fiscal situation, the Government’s strong commitment to investment in public infrastructure, which is critical for improved productivity to boost the long term economic growth, has been demonstrated with stepped up allocation for infrastructure development, rural infrastructure and housing, urban development, slum re-development and urban housing for the poor.
The promising Rajiv Awas Yojna whose draft guidelines have already been prepared by the Ministry of Housing, gets the much needed financial backing of Rs. 1,270 crores, marking a 700% increase from last year. RICS welcomes this initiative which holds promise to realise
A steep 61% increase in new and renewable energy funds will augment the country’s mission towards Climate Change and the National Mission on Solar Power. Future plans for FDI policy to be made more user-friendly with one comprehensive document are likely to encourage investment climate.
While the finance minister has initiated steps for a gradual rollback of stimulus including slight increase in the excise duty, the needs of the real estate and construction sector have been considered, evident from the announcement to allow housing projects to complete projects in five years instead of four years to avail tax break.
Although the housing sector was hoping for a number of direct as well as in-direct tax reforms, no significant changes have been announced in the budget session. However given the reality that both the Direct Tax Code and Goods and Service tax code need further refinement to work out the overall revenue impact and implementation logistics, it has been only prudent to have minimal changes in tax structures for the time being. Retention of service tax at 10.3% amidst widespread belief of it being revised back to 12% is inline with the strategy to make consolidated tax reforms next year.
Modification of the direct tax slab structure, resulting in relief to nearly 60% of taxpayers, has given the common man ample reason to cheer, and would leave more money in the hands of low to middle income groups for consumption as well as savings. This coupled with extension of 1% interest subsidy scheme on home loans upto Rs 20 lakh will maintain the recovery of the affordable homes segment.
Summary of the Fiscal Deficit and Expenditure
In the wake of the recessionary period, fiscal measures like tax-cuts and rebates along with increased government expenditure resulted in improving the economic health of
Taking note of industry sentiments for consolidating fiscal deficit, the Finance Minister stated that this figure will come down from 6.9% in the revised estimates for the current fiscal. With the Government targeting an explicit reduction in its domestic public debt-GDP ratio, it is expected that the fiscal deficit decrease further to 4.8% and 4.1% in 2011-12 and 2012-13 respectively. The reduction in fiscal deficit in sync with the gradual and phased withdrawal of the stimulus packages are a welcome move, as they would not adversely affect the investment in public infrastructure.
The total expenditure proposed in the budget estimate is Rs. 11,08,749 crore; an increase of 8.6% over last year. The planned and non planned expenditures in budget estimates are Rs. 3,73,092 crore and Rs. 7,35,657 crore respectively, indicating a 15% increase in planned and 6% increase in non-planned expenditure
Budget announcements that are likely to have a positive impact on the real estate and construction sector
Infrastructure, Road and Railways
- Allocation of Rs. 1,73,552 crores for infrastructure, accounting for 46% of the total plan allocation
- Allocation for road transport has increased by ~13% to Rs 19,894 crore
- Rs 16,752 crore has been extended to the Railway sector, which is around Rs.950 crore more than the previous year
- IIFCL’s disbursements are pegged at Rs 9,000 crore by March 2010 and ~Rs 20,000 crore by March 2011
- IIFCL has refinanced bank lending to infrastructure projects of Rs. 3,000 crore during the current year and is expected to more than double the amount in 2010-11
- Government committed to ensure continued growth of Special Economic Zones
Urban Housing and Development
- Allocation for Housing and Urban Poverty Alleviation has been increased to Rs.1,000 crore as compared to the earlier allocation of Rs. 850 crores
- Rs.1,270 crore has been allocated for Rajiv Awas Yojana as compared to Rs.150 crore last year
- Allocation for urban development has been increased by more than 75% from to Rs.5,400 crore
- The scheme of 1% interest subvention on housing loan up to Rs.10 lakh, where the cost of the house does not exceed Rs.20 lakh, has been extended up to March 2011; Rs. 700 crore has been extended towards the scheme for 2010-11
- Pending projects have been allowed to be completed within a period of five years instead of four years for claiming a deduction on profits, as a one time interim relief to the housing and real estate sector
Rural Housing and Development
- A plan outlay of Rs. 66,100 crore, amounting to 25% of plan allocation has been provided for rural infrastructure
- An amount of Rs. 48,000 crore has been allocated for rural infrastructure programs under Bharat Nirman
- Allocation for Indira Awas Yojana (rural housing scheme), has been increased to 10,000 crore. Unit cost has been increased to Rs.45,000 in the plain areas and to Rs.48,500 in the hilly areas
Announcements to promote Green Infrastructure
- Plan outlay for the Ministry of New and Renewable Energy increased by 61% from Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11
- National Clean Energy Fund for funding research and innovative projects in clean energy technologies to be established.
- Solar, small hydro and micro power projects at a cost of about Rs.500 crore are to be set up in Ladakh region of
Jammu and Kashmir
- Provision of concessional customs duty of 5% to machinery, instruments, equipment and appliances etc. required for the initial setting up of photovoltaic and solar thermal power generating units has been extended. Also, these have been exempt from Central Excise duty
- Central Excise duty on LED lights reduced from 8% to 4% at par with Compact Fluorescent Lamps
- Deduction of an additional amount of Rs. 20,000 allowed, over and above the existing limit of Rs.1 lakh on tax savings, for investment in long-term infrastructure bonds
- Rate reduction in Central Excise duties have been partially rolled back and the standard rate on all non-petroleum products has been increased to 10% from the current 8%
- The specific rates of duty applicable to portland cement and cement clinker have also revised upwards.
- Rate of tax on services has been retained at 10% to pave the way forward for GST
RICS is the world's leading self regulatory professional body for qualifications and standards land, property, construction and associated environment issues. In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining RICS status is the recognised mark of property professionalism.
Over 150 000 property professionals working in the major established and emerging economies of the world have already recognised the importance of securing RICS status by becoming members.
RICS is an independent professional body originally established in the