Industry Associations

The increase in turnover limit under presumptive taxation scheme under section 44AD of the Income Tax Act to Rs 2 crore is highly appreciable, as it will bring big relief to a large number of assessees in MSME category.

Focus on development of infrastructure through high allocation of Rs 2,21,246 crore, while capital expenditure of Rs 2 lakh crore on railways and roads will lead to creation of state of the art infrastructure, which is much needed for upscaling manufacturing growth and fuelling economic growth in the coming times.

The budget focuses on socio-economic development as Rs 1,700 crore has been allocated for 1,500 multi-skill development centres while 62 new Navodaya Vidyalayas to provide quality education. Also, the additional healthcare cover of Rs 30,000 for senior citizens is a step in the right direction.

100% FDI allowed in marketing of food produce manufactured and processed in India will give a boost to not only the food processing industry but also agriculture sector. It will give a push to the ‘Make in India’ initiative of the government.

Allocation of over Rs 87,000 crore for rural development is encouraging as it will increase farmers’ income in the coming times and fuel rural demand, which is the need of the hour.

Allocation of RS 38,500 crore for MGNREGA will facilitate employment generation in rural areas and will facilitate all-inclusive growth in the economy.

The Price Stabilisation Fund set up with a corpus of Rs 900 crore is inspiring, as it will help to maintain stable prices of pulses which have been a cause of worry in recent times.

We are happy that our suggestion to increase deduction on exemption for Income Tax on interest paid on home loans has been partly accepted, as there is an additional exemption of Rs 50,000 for housing loans up to Rs 35 lakh provided cost of house is not above Rs 50 lakh, which will give a boost to the real estate sector. However, we feel that there should not be any cap on the price of house. It should be open-ended for the house buyers.

The allocation of Rs 25,000 crore towards recapitalisation of public sector banks is inspiring. However, the current state of banks desires more allocation of funds.

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Overall, It is a very positive budget for the real estate sector and CREDAI is certain that this will spur the market and induce the home buyer, who has been waiting ever since for some special incentives to actually be able to buy a house. The best part is that there is a timeline fixed for delivery of such affordable houses.

All we ask for now is speeding up of the approval process, as the whole project needs to be delivered in a time frame of about three years.

Although this budget didn’t have much for the corporates, the construction and building materials industry stands to gain from the probable rise in demand. For instance, the fresh allocation of Rs 9,000 crore in Swachh Bharat Abhiyan is a boon for the sanitaryware, tiles and plastic taps and bath accessories industry. Similarly, the emphasis on building the infrastructure is also expected to create demand for building materials.

Apart from this, the thrust on affordable housing augurs well for the industry. With the revival of the real estate industry, the building materials industry will also gain significantly in terms of project sales and improved cash flow.

Further, the thrust on rural economy is expected to boost demand there. Additionally, steps to bolster the agricultural sector will also be good news for those involved in the sector, especially pumps and pipes.

The housing market has been facing stiff challenges with mounting pressure on the rural economy, further aggravated by inadequate monsoons for two consecutive years along with a slackening real estate demand across the country. The Union Budget’s allocation of Rs 35,984 crore for agriculture and farmer welfare is a promising step in bolstering confidence and reviving demand in the rural economy.

The total outlay for infrastructure at Rs 2,21,246 crore comes as a welcome move for stimulating infrastructural development. We foresee a surge in demand for housing, further facilitated with a better rural economy.
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We, as a brand, have been the frontrunners in the industry to promote self-hygiene and clean environment for the people. Abiding with the PM’s commitment towards Swachh Bharat Abhiyaan, the allotment of Rs 9,000 crore for the campaign is bound to give results this year to the sanitaryware industry.

Other key takeaways from this budget like additional discount of Rs 50,000 on home loans (up to Rs 35 Lakh) for first time buyers, and 100% exemption of profit for developers and exemption from service tax on construction of affordable houses up to 60sqm, will help grow the real estate industry and consequently allied sectors like ours.
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A strong step has been taken to pump the rural economy and the infrastructure sector. It is expected to surely yield benefits with a multiplier effect. The massive increase in public spending on infrastructure has definitely paved the way for developing sectors. The allocation of funds in infrastructure is thus likely to propel the transport, warehousing and logistics businesses rapidly over the medium term.

This budget is all set to boost the sentiment of the real estate sector and now there is enough on the platter to induce home buyers and developers, taking real estate forward on the road to revival and sustained growth. It has also addressed the important issue of bringing home prices within the reach of the masses, and will push up disposable income to enhance affordability. The service tax exemption to developers undertaking affordable housing will help cut housing costs.

With regards to unmet expectations, we feel that, except for the proposal to increase the time limit to avail tax incentive on home loans from 3 to 5 years, the budget has come up short on addressing the important issues bothering the consumer – delays as well as lack of transparency. [This has been addressed in the Real Estate (Regulaltion and Development) Bill 2016 in the sessions following the budget.]
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For this financial year, the government has announced many innovative, beneficial and ambitious schemes which will certainly help various industries that depend on agriculture business. Since irrigation plays a crucial role in farming, PVC Pipes business will get an advantage of these government schemes as the schemes launched are specifically related to improving irrigation.

One among the governemnt schemes launched is the Pradhan Mantri Krishi Sinchai Yojana wherein 28.5 lac hectares will be covered under irrigation. This project is directly related to our business. Additionally, implementation of 89 irrigation projects under AIBP (Accelerated Irrigation Benefit programme), which  has been languishing since long, would be fast tracked.

A dedicated Long Term Irrigation Fund will be created in NABARD with an initial corpus of about Rs 20,000 crore. This will ensure that major farming area would be covered under irrigation. Another program for sustainable management of ground water resources with an estimated cost of Rs 6,000 crore will be implemented on a pan-India basis.

We expect these measures to give a strong impetus to the demand for PVC pipes and fittings in the years to come. As far as the PVC sector and the area of operation for Finolex Industries is concerned, it has been a great budget and we have no unmet expectations.
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• While there was no major reform or change in the duty structure, devaluation of Indian rupee against dollar is putting pressure on prices.
• The budget was okay for us, would have been better if government would have supported wooden flooring industry like any other industry.
• Further, the industry needs policies to cut down on inferior products and protect consumer interest.

• Overall, the Union Budget augers well for the real estate sector, having addressed Affordable Housing, REIT and Infrastructure.
• The housing sector will get a push from both supply and demand side. The first time home buyers will be encouraged since they get an additional deduction of `50,000 on interest for loans up to `35 lakh and a house value of `50 lakh. In effect, it will reduce the cost of loan which will boost the demand for housing in the budget to mid segment.
• On the supply side, 100% exemption of profit for developers and exemption from service tax for construction of houses less than 650sft will encourage supply in the affordable housing segment.
• REIT has finally got its due with the abolishment of the DDT that was holding back asset owners. This is a welcome move for the industry. There will be no road block in launching REIT schemes any time now.
• Infrastructure and rural development focus in the Budget has been encouraging and is expected to give the much needed fillip to the real estate sector. With massive push in infrastructure (huge outlay for roads and railways and developing smaller airports to improve regional connectivity) and incentives to MSME, Make-in-India will get a further boost that will benefit the real estate sector in the long run.
• The government’s focus on digitisation of land records as spelt in the Union Budget is in the right direction especially in the rural areas, which will render land records free from encumbrances.

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• The Finance Minister’s announcement of highest ever allocation of `38,500 crore to MGNREGA may have a significant impact on availability and cost of labour for construction. The real estate and construction sector, being still largely labour dependent, would face a significant adverse impact. This has come at a time when the sector is not doing well.
• Development of new credit rating system for infrastructure is a welcome move. While the details of the credit rating mechanism have not been announced, the Finance Minister in his budget speech has indicated that the risk profile for infrastructure would need to be viewed differently given the long cycle time of these capital projects and its unique challenges.

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• There has been a tremendous effort towards boosting the demand side of the equation by a thrust on infrastructure spending and on improving investment in the real estate sector by the abolishment of the DDT on REITs.
• The allocation of `2.18 lakh crore towards improving connectivity with railways and the road construction target is an additional boost to the infrastructure segment.
•  The 100% deduction on profits for affordable homes up to 30sqm for metros and 60sqm for non-metros, service tax exemption on construction of affordable homes, and an additional `50,000 deduction for buyers on homes of less than `50 lakh is a positive step towards the government’s ‘Housing for All’ mission.
• Further, the budget has provided a necessary thrust towards the skill development of one crore youth under the PMKY, which is essential to meet the development requirements of the economy.

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The focus on affordable housing will give the much-needed impetus to develop greater number of affordable housing projects across the country, thus, directly aligning the agenda with the prime minister’s vision of ‘Housing for All’. Increasing the limits on interest deduction on homes costing less than `50 lakh and removing the Dividend Distribution Tax on REITs, both are welcome measures which will help boost the attractiveness of India’s housing sector.

The approach of the FM is one of quantum jump rather than tinkering, which would accelerate the development process and put the Indian economy on a sustainable growth trajectory, while further expediting the ‘Make in India’ programme and ‘Swachh Bharat Mission’.

The budget is a very positive step to promote growth of real estate in the country. It will have a two-fold impact – one, it will lead to additional sources of capital for developers and two, it will allow various stakeholders to participate in the real estate growth story of the country by unlocking value.

• This year’s union budget has been encouraging for the housing finance sector and the overall economy. The proposal to introduce 100% deduction with respect to undertakings for construction of affordable housing will help us in realising honourable PM’s ‘Housing for All by 2022’ scheme.
• The proposal to introduce guidelines for renegotiation of PPP contracts and reform dispute redressal mechanism will encourage private participation in the development of affordable housing projects and road infrastructure.
• The decision to improve the ease of doing business in India by deepening corporate bond market and announcing initiatives to reinvigorate private sector has come at the right time. This coupled with reduction in corporate tax rates from 30% to 29% from FY18 for companies with turnover less than `5 crore will boost the SME sector and help in economic growth.
• We also look at this Budget as one which has been quite responsible on the deficit and borrowings. Coupled with fall in crude prices, which are a major input cost in our system, we can safely bet on inflation remaining benign. We see a very positive move on interest rate front as well as on bond market that will give a great fillip to financial services sector.

Tax exemption for start-ups, amendments to Companies Act and allocation for ‘Stand-up India’ scheme will further aid cost and ease of doing business in India.

The enhanced investment in infrastructure will help us in reaching to a wider consumer base in housing which is unserviceable today. We are happy that the FM went a step further in the direction shown at ‘Start-up India’ and announced tax holiday for start-ups for setting up business.
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• The Union Budget 2016 did not have much to look out for the start-up community, as we were hopeful of seeing some on-ground initiatives to further ease regulatory clearances.
• Prime Minister’s declaration of 100% tax deductions for new start-ups for first three years is definitely an optimistic move for nurturing entrepreneurship and facilitating ease of doing business.
• Government’s effort to provide skill development and training to youth along with implementation of digital literacy will help further boost the start-up ecosystem.
• We are hopeful of more immediate action from the government in fostering a conducive environment for the entrepreneur community.

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• The budget 2016 definitely sounds like a great follow-up to the promises made during ‘Make in India’.
• It will be interesting to see how efficiently the ‘Start-up India’ funds are utilised. This will definitely be something all start-ups and investors will be watching out for.
• Skill Development and Digital Literacy Mission are not only great social initiatives, but will also widen the addressable market for digital start-ups as making the Internet accessible to the masses will also create more consumers.
• n    As the markets/demands for digital start-ups grow, they are bound to attract monetary backing. Therefore, we are quite pleased with these steps towards infrastructural and digital growth.

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It is heartening to know that the GDP is regaining the growth momentum. The six crore household target set for the Digital Literacy scheme in next three years is also a welcome step. This indeed will make more consumers aware about the new-age digital payments ecosystem and further push the cause towards embracing a cashless payments environment. Additionally, complementing the digital payments push is the government’s drive to help money reach the public without any leakages in the value chain. Overall, all these augur well for the digital payments landscape.

It is evident that the government continues to focus on re-fuelling investments in infrastructure with a high priority on transportation sector. The concerted efforts so far to get stranded road projects back on track certainly seems to have a positive impact, though I believe for the next couple of years a large part of the development funding in infrastructure sector would still have to be incurred on the government’s balance sheet rather than private sector’s.

Expediting dispute resolution in infrastructure is aligned to the Kelkar Committee report and was expected, though I believe allowing renegotiation of terms in PPP contracts is a rather bold step with positive intent. Initiating renegotiation of contracts is a sensitive issue and may certainly need to be rationally calibrated in a well defined framework to avoid any undue advantage being passed on to stakeholders.

Given the huge NPAs already disclosed in the last two quarters and continued high stress expected on various public sector bank balance sheets, the disappointing part was the limited corpus allocated for recapitalisation. This may adversely affect companies in infrastructure and other core sectors committed to undertake capital expenditure in near future.
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The budgetary announcement by Finance Minister heralded many positives for the logistics industry. Rs 2.21 lakh crore is a record for investment in infrastructure for the nation. That said, it is much needed for the country’s growth story to stay on track. Moreover, transport and logistics sector has demonstrated a strong growth in the current year within the backdrop of a rather challenging global economic situation. Some of the positives seen for this budget are:

• Significant investment allocation of Rs 70,000 crore to expedite creation and expansion of highways will be one of the strongest boosts to our economy.
• Additional investment in rural roads at a rapid speed would significantly augment the economic growth. This, coupled with allocation of funds to railways is likely to grow the transport, warehousing and logistics businesses rapidly over the medium term.
• Knowing that the logistics industry has not received the desired attention or recognition in India, it’s good to see how the infrastructure is set to build up rapidly especially with more road networks which will enable timely movement of goods.
• Additional discount of RS 50,000 on home loans (up to `35 Lakh) for the first time buyers and 100% exemption of profit for developers and exemption from service tax on construction of affordable houses up to 60sqm will help grow the real estate, cement industry and consequently the allied sector like sanitaryware and ours.
• Apart from creating more jobs and making India export competitive, this initiative will boost logistics companies providing integrated solutions. Additional one lakh km of road projects will ease congestion on existing infrastructure.
• The allocation of Rs 9,000 crore for the Swachh Bharat campaign should not only accelerate the growth of sanitaryware industry, but will also give a boost to the logistics sector since transportation will move further to unexplored urban and rural territories across India.

Although there were many positive takeaways from Union Budget 2016, there are still a few areas which need to be addressed for smoother and successful operations in the logistics sector:

• The industry is looking forward to GST becoming a reality in April 2016, with the hope that the effective tax rate decided would translate to a collaborative gain for corporates and consumers.
• The logistics industry is highly fuel intensive and its operating cost is largely dependent on the petroleum prices. Currently, the state government levies VAT and other taxes on transaction of crude oil and petroleum products which increase the overall trading cost, making the independent storage and trading business unviable. Implementation of GST will be welcome for logistics companies as they would be able to avail credit for the petroleum used.
• The logistics industry feels that contentious issues like the clear definition of supply, supply chain management through warehouse engineering, credit allowance during the transition phase, classification of goods and services under GST, etc need to be addressed for implementation of GST.
• It will be ideal if the key stakeholders of the logistics sector including the decision makers from the government can sit together and address these concerns before the roll out of GST. This could help in mitigating discrepancies and bringing out a well thought tax reform.

Overall the government has set an extremely encouraging budget for Indian market to keep the engines running faster when the global markets are melting. India could take major advantage of the current international economic situation and emerge as a new leader in the global market. Continuing on the reform agenda, Union Budget 2016 is built on sharp forward-looking themes. This will provide a strong impetus to the transport and logistics sector.

Mrinmoy Dey

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