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Budget should give impetus to infrastructure, smart cities: Shishir Baijal

Shishir Baijal     February 20, 2015

Shishir Baijal

1. The Budget should focus on driving the economy. It should strike a balance between growth and development so that the GDP growth that we aim to achieve becomes sustainable. Currently, private investment in the economy is not impressive and hence, it is necessary for the government to pump investments to kick-start the growth process. It is necessary to give impetus to the infrastructure sector. The government is expected to lay down a holistic plan for the entire infrastructure sector, with a specific map to take the '100 smart cities' project forward with commensurate Budget allocation.

 2. Housing for all by 2022 - This vision of the current government has to get a thrust in the upcoming Budget in terms of its plan, milestones and the allocation of funds. The vision also requires corresponding support in terms of improving connectivity between the peripheral areas of a city and employment hubs. This is likely to be an effective tool for the rationalisation of real estate prices.

3.The following issues concerning REIT (Real Estate Investment Trust) should be addressed:

a. The exchange of shares of the SPV (special purpose vehicle) for units of REIT would happen at the market value and may result in profit in the hands of the sponsor. It may entail tax liability in the hands of the sponsor under the provisions of the Minimum Alternate Tax (MAT).

b.    The requirement of holding REIT units for more than 36 months to qualify as long-term capital assets may act as a disincentive for investors when compared with listed equity shares, where the period of holding to qualify as a long-term capital asset is more than 12 months. Parity is required to make investing in units of an REIT lucrative for investors.

4. The government should focus on improving the supply chain. This will help not only prevent the wastage of agricultural produce, but will also attract private investors to the warehousing sector, which caters to retail, exim business and the manufacturing industry. With the introduction of the Goods and Services Tax in 2016/17, and the ongoing change in the structure of the retail market in India, this seems to be of utmost importance.

5. Though not a direct budget item, the Real Estate Regulation Bill has to get a mention in the document. It will reflect the intention of the government to make the real estate sector transparent, comparable to most of the other sectors such as insurance, telecom and the securities market.

The author is Chairman & Managing Director, Knight Frank India

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