Government Clears Key Infrastructure Projects in UP, Haryana, Maha and Telangana

While all eyes on the expected budgetary sops for the struggling infrastructure and real estate sectors, there has been some positive news emanating from different parts of the country during the last couple of months, which can rejuvenate the construction industry as a whole from its current precarious state.

Navi Mumbai International Airport

The Ministry of Civil Aviation has recently cleared the proposal to build the much-delayed Rs 15,000-crore Navi Mumbai International airport. The government has given an in-principle go-ahead for financial bids or Request For Proposals (RPFs), which will be soon shared with the four bidders shortlisted for the project, according to official sources. The four bidders are GMR Group, GVK-led MIAL, Hiranandani Developers along with Zurich Airport and Mia Infrastructure with Tata Realty and Infrastructure.

The airport is expected to commence operations from October 2019, while the developer and operator will be required to pay an annual concession fee prior to that. The fee would range from Rs 5 crore in the first year to Rs 1,250 crore from the 40th year of operation.

The government is expected to earn Rs 17,000 crore during the sixty-year period, the net present value of which is likely to be nearly RS 2,045 crore. It is also clarified that the airport project will be awarded only for 30 years (and not 60 years), with extension periods of 10 and 20 years, while the ten-year extension period beyond the 30th year would be on the basis of the operational performance of the airport operator.

The winner of the Navi Mumbai Airport project will also get a Rs 3,000-crore interest-free loan from City and Industrial Development Corporation (CIDCO), to be repaid over a period of 10 years.

Sewri–Nhava Sheva Mumbai Trans Harbour Link gets the Centre’s nod

After being stalled for several months due to the lack of environmental clearances, the Sewri–Nhava Sheva Mumbai Trans Harbour Link received an in-principle approval from the Ministry of Environment and Forests (MoEF). To receive the final clearance, the Mumbai Metropolitan Region Development Authority (MMRDA) is required to prepare a fresh application for tribal rehabilitation in the forest area. The project is worth Rs 12,000 crore and the tendering process is expected to commence soon, while MMRDA is working out a formal loan agreement with the Japan International Cooperation Agency(JICA) for funding the project.

Deadline set for the Coastal Freeway

The Maharashtra government has set 2019 as the deadline for the completion of the Coastal Freeway from Nariman Point to Kandivali. The Central Government has released a notification amending the Coastal Regulation Zone norms, permitting the reclamation of land for the coastal road.

Telangana gets RS 41,000-cr road, highway projects

The Central Government has announced road projects worth RS 41,000 crore for Telangana; these include two express highways from Hyderabad to Bengaluru and Vijayawada. The government has also offered to provide further assistance in case a new national highway is proposed for the state.

NCRPB to assist nine transport infrastructure projects in Uttar Pradesh and Haryana

The National Capital Region Planning  Board (NCRPB) has announced support for seven transport infrastructure projects in Uttar Pradesh (UP) and  two in Haryana together costing Rs 7838 crore, which would help considerably in resolving traffic and pollution issues.  The NCRPB would extend a loan assistance of Rs 3,113 crore for these projects.

The UP projects include the construction of a 10.30-km, six-lane elevated road in Ghaziabad, expected to be completed by the end of 2016. This road would extend from UP Gate to Raj Nagar Extension, connecting NH-24 with NH-58, while also serving as a bypass on the Kosambi–Mohan Nagar–Vaishali section.

On completion, the travel time between UP Gate and Hindon bridge is likely to reduce to around 15 minutes from the current 50 minutes.

The UP projects also include the 29.70-km Noida–Greater Noida Metro Project, which is awaiting final approval from the Central Government.

Among the projects proposed in Haryana is the development of the 52.33-km Manesar–Palwal Expressway, connecting NH-8 with NH-2, which is expected to be completed in 12 months. The improvement of the 38.41-km Gurgaon–Pataudi–Rewari road on SH-26 and the development of a 5.80-km elevated road on NH-10 from Chhotu Ram Chowk to Old Bus Stand in Rohtak are the other upcoming projects in Haryana.

Maharashtra defers revision of ready reckoner tax rate to April 1

The Maharashtra government has decided to defer revising the ready reckoner rates to April 1 instead of January 1. This decision is aimed at aligning any changes in the rates with the government’s tax revenue targets for the financial year. Thus, homebuyers can avail themselves of the existing rates for three more months.

Construction Industry can Help India Sail Through Any Global Crisis: ASSOCHAM

In the midst of doom and gloom in the global economy with consequential impact on India, highly job-oriented construction industry can give quite positive results in terms of stepping up economic growth, more employment and raising  tax revenue for the government, if the stress-ridden sector is provided immediate succour,  an ASSOCHAM-TARI study pointed out.

“Construction sector, which is the second largest employment generator after agriculture, comprising roads, ports, airports, bridges and real estate, has the multiplier potential to create benefits at least double the size of direct inputs,” highlighted the study titled ‘Construction industry: Contributing to Make in India,’ conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) jointly with Thought Arbitrage Research Institute (TARI).

“The output multiplier demonstrates how an increase in demand of Indian construction sector can lead to an increase in overall output of the economy by 2.4 times thereby showcasing strong backward linkages of the sector with ancillary and complementary industries such as cement, steel, iron, bricks, sand, chemicals, heavy machines and equipment, sanitary ware, wood, electrical and other fixtures, paints and others,” noted the study.

“Over 75 percent of real estate projects of the total investments worth over Rs 14 lakh crore remained non starter (under implementation) as of FY15 owing to plethora of issues like delays in environmental clearances, project approvals, acquisition, lack of finance and carrying the baggage of badly executed public-private-partnership (PPP) models that are crippling growth of construction in India,” said ASSOCHAM Secretary General, D S Rawat. Others who spoke at the event included: Kshama V Kaushik, director, TARI and Babulal Jain, senior member, ASSOCHAM Managing Committee in Noida.

“One of the major problems facing the industry is a high level of debt on their balance sheets, resulting from project delays which, in turn, were caused by things like environmental issues both at the state and Central levels,” said Rawat.

“With the union government liberalising Foreign Direct Investment (FDI) rules in realty and construction sectors, we are hopeful that it will lift the affordable housing space, revive steel, cement and other related sectors, rev up employment scenario and boost the GDP (gross domestic product) growth,” he added.

The kinds of benefits which can accrue to the economy are worth pursuing rigorously, at this point of time when Indian economy is no more insulated from major problems facing the world.

 “Look at the way, the market has melted with Sensex nose-diving , further curtailing the ability of the companies in the construction to tap the market and reduce their debt burden while fresh projects are difficult to launch in the wake of huge funds locked in delayed projects,” said Rawat.

He added that financial results of most of the listed firms in the construction sector for the third quarter are going to disappoint investors.  

Production process is closely associated with employment, value addition and taxes.  In the long run, the future looks promising.

Rise in employment across the economy because of a rise of ` 1 of demand is roughly 3 times the rise in employment within the sector. Similarly, rising demand can lead to: increase in value addition of the economy by roughly three times the value addition within the sector; and increase in indirect tax collections in the economy by approximately two times that of the tax collections from the sector.

It is an acknowledged fact that construction has the potential to drive and revive manufacturing in any economy. The construction sector’s contribution to GDP in India has stayed fairly constant at around 7-8% for the last five years.

These factors along with strong backward and forward linkages of the sector with other manufacturing industries, make this sector a natural priority sector for the government and the focus of this report.

Besides, construction industry also has strong linkages with other manufacturing industries – it absorbs 40-45% of the steel industry’s output, 85% of the paint industry, 65-70% of the glass industry and a significant share of the automotive, mining and excavation equipment industries.

The ASSOCHAM-TARI study has estimated the output multiplier of the construction sector to be 2.384, this means, an increase of ` 1 in final demand in the construction sector will lead to an increase of the overall output of the economy by two times

It has estimated the employment multiplier of the construction sector to be 2.88, which is means, employment generated in the economy because of rise in demand of the construction sector is 2.88 times of the employment created in the sector itself

The study has estimated the tax multiplier of the construction sector to be 1.962.This means that rise in indirect tax collections generated in the economy because of rise in demand of the construction sector is approximately double the rise in indirect tax collection from the sector itself.

Real estate investment scenario in UP as of FY15:

UP has attracted about 16 per cent of the total investments worth over Rs 12 lakh crore attracted by real estate sector from private investors (including both domestic and foreign) as of FY 2014-15 in India and has managed to increase its share from just 0.1 per cent to 16 per cent during the last decade in this regard.

Within UP, private players accounted for over 98 per cent share in total investments attracted by real estate sector.

Real estate investments in UP have grown at a compounded annual growth rate (CAGR) of about 32 per cent during almost a decade (b/w 2005-06 and 2014-15).

Over 86 per cent of real estate projects in UP remained stuck and are facing a delay of about 35 months on an average.

Construction industry should be regularised to check pollution: ASSOCHAM

With fast deteriorating air quality in big cities like Delhi-NCR leading to tougher regulatory norms such as the odd-even policy for private cars, the high stake construction industry should be prepared to deal with possible public outrage and must devise ways for meeting such challenges, an ASSOCHAM Paper noted. 

"There are a number of environmental concerns that impact the Indian construction industry. These include erosion, contaminated soil, lead paint removal, air contamination by asbestos particles, disposal of hazardous material, dust control and noise level," it said. 

Mapping various policy and regulatory risks which have increased with rising environmental concerns, the paper stated these issues were also flagged by a working sub-group of the erstwhile Planning Commission. 

"We have begun this exercise of sensitising various stakeholders in the construction industry since a perception is gaining ground as if unplanned construction, done in a crude and unscientific ways is among the main culprits of pollution in big cities," ASSOCHAM Secretary General D S Rawat said. 

The paper highlighted the fact India is urbanised only the extent of 31 per cent but urbanisation at a faster pace is imperative for a sustainable economic growth. The construction industry has a major role in stepping up the urban development. 

  

"After an aborted attempt to smoothen land acquisition, any controversy on environment pollution is the last thing that the industry wants," the ASSOCHAM said. 

  

In the absence of planned and organised urban development, cities have witnessed mushrooming of slums which now account for a quarter of all urban housing. Mushrooming growth of slums with lack of sanitation and absence of waste disposal add to the city pollution.

“Pollution in some of the big cities is becoming unbearable and as happened in the past, the court intervention, accompanied by pressures from civil society, health activists and environmentalists would bring in tougher regulatory norms for a host of industries which should be living up to these challenges by technology innovation and going green in their approach,” the chamber said.  

  

Except for the top 20 players, the Indian construction industry is highly fragmented, family owned, or based on individual ownership. "The process of evolving has been painfully slow and unplanned. Even a lot of construction happens in the primitive way with concrete and bricks being moved by head load. Mechanisation has crept in as projects have become large but these are only a small fraction of the construction market, ASSOCHAM noted.

ASSOCHAM demands relief to construction and aviation sectors

ASSOCHAM today sought removal anomalies as regards taxes on several sectors including the synthetic fiber, construction industry and benefits for the maintenance and the troubled civil aviation sector at the pre-budget meeting with the Revenue Secretary.

The ASSOCHAM delegation led by Ved Jain, chairman of ASSOCHAM National Council on Direct Taxes said that the service tax rate and excise duty rate should be brought down to 8% from existing rate of 12%, as prevailing two year back, to accelerate the industrial growth.

It said tax base for goods and services has already expanded last year to generate higher revenue. The government can selectively increase customs duty rates to neutralize the effect of lower tax rate of excise duty and service tax.

They said the Goods and Service Tax should be introduced and ASSOCHAM should be involved in its implementation.

Besides, excise Duty on Synthetic Fibers which was increased from 4% in 2008 to 12% in the successive Budgets should be brought back to the original level because the competing fiber Cotton has effectively no Excise Duty.

Polyester Industry is competing with Cotton yarn that attracts zero duty. This is required in line with the national fiber policy and to increase demand, capacity utilization and employment in the synthetic fiber industry, the chamber said.

 Service Tax levied on construction services until year 01.04.2011 was allowed as credit, but now credit is not allowed, which is retrograde steps and without any rational credit when credit was specifically allowed from 2004 to March 2011.

Therefore, now, when credit of service paid on such construction services are not allowed as credit, it should attract concessional rate of service tax at the rate of 2%, as entire service tax is cost to Industry.

In view of the significant fall in the value of rupee in the last two years, the duty free allowance of travelling passengers should be revised. The allowance be raised from the current level of Rs 35,000 to Rs 50,000 for the incoming international passengers. Additionally, it should be raised for children to Rs 20,000 from Rs 15,000.

The MRO business in the civil aviation sector has huge potential to attract foreign investment. It is desirable to exempt the MRO services from imposition of service tax. These services need to be inclued in the negative list.

ASSOCHAM members said the base exemption limit of resident individual below the age of 60 years should be increased to Rs 3 lakh, to incentivize people to come into the tax net , ensure higher collection from greater compliance and encourage consumption and savings,” reveals the ASSOCHAM  pre-Budget memorandum for 2013-14.

“In recent times, tax reopening notices under Sections 147/148 have become a very common occurrence and such notices are being served in thousands across the country. Simple audit observations, even on points of law are frequently being used as grounds for re-opening leading to extreme harassment of all assesses. The position has become so bad that even for legislations which have become obsolete, like Inter Tax Act, reopening are being done for very old years since the relevant law permitted reopening without any time limit”, added the Sr. members of ASSOCHAM.

It said the reopening provisions are being misused in various locations, especially for salaried assesses, where scrutiny assessment is not possible as per the CBDT guidelines.” This has become a breeding ground for corruption and harassment”, the document said.
The member of delegation discussed issues relating to NBFCs, LLPs, Airport services and MRO, Minimum Alternate Tax and deletion of section 271AA.

Mr. Jain further mentioned that payment of interest to NBFCs should be exempted from TDS u/s 194A. Also, the section 43D should be extended to include in its scope NBFCs registered with RBI. Provision for Non-performing Assets (NPAs) made by NBFCs registered with RBI should be allowed as a deduction u/s 36(1)(viia) of the Act.

Construction industry suffers due to Bihar's economic growth?

It seems Bihar’s ‘fast’ economic growth under the leadership of visionary Chief Minister Nitish Kumar has not gone down well with some of the corporate and industry heads who link the present labour crisis in construction industry to the Bihar’s booming economy.

If Bihar has been providing cheap labour all along to the construction industry, it can be interpreted that construction companies across India have been ‘exploiting’ the migrant labourers by paying a paltry sum. It is highly deplorable that construction companies are now listing labour crisis as one of the reasons for the steep hike in home prices.

The developers, instead of blaming the spurt in labour charges, should think of automation options available in the market, which not only reduces the construction cost but also helps to complete the projects before schedule.

Former head of market regulator SEBI CB Bhave has recently surprised the audience in Londan by saying that Bihar, under Nitish Kumar,  is doing 'very well', but the state's development has led to labour shortages hurting India's construction industry. Due to many new job opportunities and improved conditions in Bihar, not many in the state now migrate to other states in search of livelihood.

“This is particularly affecting the construction industry adversely,” Bhave said at a high profile seminar of top business and financial leaders from India and London, reports PTI.

The seminar, organised by the City of London, discussed various issues concerning India's economy - including last week's reforms such as hike in diesel prices, changes in rules to allow FDI in aviation and multi-brand retail sectors - but quite a few in the audience were surprised at the Bihar example.

"The construction industry is suffering from serious labour shortage. For years, the industry depended on labourers from Bihar, but now when they take leave and go home, 70 per cent do not return to work on construction projects in other states," Bhave said.

Not only the reforms in Bihar which make people comfortable at their home state, the Central government’s sponsored National Rural Employment Guarantee Scheme, which gives people in rural areas 100 days of assured employment in a year, has also arrested people from less developed states migrating to other states in search of jobs. Most these uneducated rural youth generally land up in construction sites as daily wagers.

Apart from Bihar, the construction industry is getting labourers from Odisha, Andhra Pradesh, Assam and Uttar Pradesh.

Nasser Munjee, chairman of the Development Credit Bank, also noted the improved conditions in Bihar, particularly in cities, but added that much needed to be done for development to reach rural areas in the state.

On the phenomenon of some states doing much better than others in terms of economic growth and development, Ajay Shah, senior fellow at the Delhi-based National Institute of Public Finance and Policy, said "competitive dynamics" between states in India was yet to emerge.

Booming construction industry strains India’s natural resources

Thanks to the booming real estate industry in India, the country’s mountain ranges is under threat from the illegal stone-mining mafia. It’s become a daily sight for the residents of Biharipur on the Dabla mountain in Rajasthan, as more than 100 trucks wroom past the village carrying loads of crushed stones quarried from the nearby mountain. If this not enough, villagers have to bear the brunt of increasing air pollution and deafening blasts occurring on the mountain every now and then.

"We have more than 100 trucks coming through our village every day. It is like a living hell," Gulla Ram, a 70-year-old farmer in the village, says, adding, life has become stressful for the villagers.

When it is not trucks, it is explosions, often dozens at a time. They can come at any moment of the day or night, another villager quips, while showing the cracks that appeared on the walls of her home over the past two years, online portal thenational, said in a report.

The villages on the mountain are the worst hit due to the illegal mining by what the locals refer to as the "mining mafia". Accusing the local politicians and police of conspiring with quarry owners to ignore regulations, villagers allege that local officials conniving with miners allow indiscriminate mining activity in the area.

The Aravalli mountain range, which includes Dabla, stretches deep into central India passing through Rajasthan. But these days, the mountains have become valuable for more than their natural beauty as India's booming construction industry is in a desperate need for marble and elements, such as clay and sand, to make cement and aggregates for laying pathways and roads.

Dabla is one of the last parts of the Aravalli Range still open to mining after the Supreme Court, concerned about reports of environmental devastation, banned miners from operating in the neighbouring state of Haryana in 2009.

Miners flocked instead to Rajasthan, where local officials have allowed the mushrooming of quarries and stone-crushing units through the hills and valleys.

The mining activities are severely polluting air which will affect the health of the local community in the long run. "These mines and crushers are destroying rivers, destroying crops, destroying villages," says Kailash Meena, the local representative of the People's Union for Civil Liberties, who has been spearheading the anti-mining campaign.

"Every government officer knows these mines are illegal but no one is taking any action," he says. Villagers complain the quarries are encroaching on communal grazing land and protected forest reserves, and drying up water supplies they need for crops and animals.

Government documents obtained by activists last summer showed that 49 mining leases had already been granted for Dabla mountain alone, of which a third were already in operation, along with 22 sand-silting operations and five stone-crushing sites.

The government justifies the presence of quarries and stone crushers by saying they have brought significant revenue and employment to an impoverished area. The locals counter that very few of them have received jobs working for the mining companies.

Khandelwal did admit that regulations were regularly flouted by mining operations and that many operated illegally. He blamed ambiguous rules and the lack of local supervising authorities for the lapses, and denied taking any bribes from mining companies.

Though construction industry in developed countries are using Recycled Concrete Aggregate for construction of new buildings and Recycled Asphalt Pavement for re-laying of roads thereby saving considerable amount of virgin material apart from saving labour, money and fuel, India is yet to wake up to the reality that natural resources would be depleted if such unmindful activities are not stopped immediately.

“We can save up to 50 per cent of expense when we use recycled asphalt material. More than the money, we can save natural resources from getting eroded. Hills are getting reduced due to indiscriminate mining for gravels or chips which will lead to ecological degradation,” says Dr R Vasudevan of Thiagarajar College of Engineering, Madurai, who has developed and patented ‘Plastic Tar Road Technology.’ Even plastic bags are being recycled as binders to lay roads, thereby saving a good portion of virgin bitumen, which eventually save money and lessen the corbon emission.

By using the recycled construction material, considerable amount of aggregate can be saved from getting extracted from mountains.Is anyone listening?

Construction Industry needs 12 million skilled workforce: CREDAI

In an effort to provide more skilled workforce to the construction industry, CREDAI, the apex body of organised real estate developers in India, along with the National Skill Development Corporation (NSDC) has launched Skill Development Programme.

Speaking at the ‘Constro 2012’ seminar in Pune recently, CREDAI’s national president, Lalit Kumar Jain said, “The construction industry is the second largest industry contributing to the nation’s GDP. In the coming years this industry will require more than 1.25 crore of skilled labour. It is important to produce at least 25 thousand skilled labour every year.”

Getting a skilled labour is an uphill task in construction industry. To overcome this issue, National Skill Development Corporation (NSDC) along with CREDAI Pune Metro has initiated a unique program called Kushal. The main objective of “Kushal” is to impart practical skills to un-skilled & semi-skilled laborers.

CREDAI (Pune) vice-president Rohit Gera said training will be offered to construction workers in six trades - shuttering carpentry, bar-bending, masonry, plumbing, painting and tiling. “The USP of the programme lies in providing learning opportunities to poor construction workers on the job and on the site free of cost. Workers learn while they earn,” he said.

“Giving training of international standards to unskilled labours is an intricate task in itself. Focusing more on practical knowledge rather than only technical information is done by Kushal. To take our nation on a growth path, Kushal is doing a commendable work, said Shekhar Reddy, Director-NSDC and Vice President of CREDAI India.

On the evaluation pattern Gera said, “The labourer’s performance is evaluated daily by the trainer present on-site full time. Also, intermediate evaluation and final evaluation comprising an oral test and a pictorial test will be done. On completion of the programme, the laborers are awarded certification by Builders Association of India.

“The Kushal project aims at imparting training without disturbing on-site work. It consists of 80 per cent on-site training and 20 per cent classroom-based training. The most measurable outcome of the programme for the trainees is considerable wage rise, leading to better living conditions,” said Gera.

The course content has been professionally developed by experts, said CREDAI officials.

FICCI's take on skilled labour issue

For the construction sector, the New Year brought grim news. Already burdened with a shortage of unskilled labour across the country, the industry is now further hit by a serious shortfall of skilled workers.

Federation of Indian Chambers of Commerce and Industry (Ficci) and Royal Institution of Chartered Surveyors (Rics) have both warned that the sector is severely starved of proper staff.

By 2020, the construction industry will need 5 million civil engineers, architects and planners but the country is expected to produce fewer than 1 million of these professionals, says Rics.

"The industry has seen a massive increase in the last few years, especially the real estate segment due to the swelling housing needs," said Pooja Gianchandani, the director of skills development at Ficci. "Whether it is the ambitious low-cost housing schemes and programmes of the government or the demand for modern homes, each of these require a pool of specialised and trained manpower that cuts across professionals like engineers, architects, designers and so on."