Current Affairs

Interest subsidy of about Rs.920 crore disbursed under CLSS

August 2017
The Ministry of Housing and Urban Affairs has asked the National Housing Bank (NHB), HUDCO and public-sector banks to more proactively promote the Credit-Linked Subsidy Scheme (CLSS) of the Pradhan Mantri Awas Yojana (PMAY) (Urban) to meet the target of Housing For All by 2022. It has also reviewed the progress of affordable housing under CLSS and directed NHB and HUDCO, the two central nodal agencies, to prepare action plans to ensure that at least one-fourth of the mission target is met under the CLSS component of PMAY (Urban). The ministry has also directed that at least 2 lakh MIG beneficiaries should be identified by December this year. What's more, new housing finance companies have been set up and registered in the past couple of months. Notably, affordable housing loans below Rs 10 lakh have surged 43 per cent in FY2017.

'We are working to give a major boost to the CLSS component under PMAY (Urban),' affirms Rajiv Ranjan Mishra, Joint Secretary (Housing), Ministry of Housing & Urban Poverty Alleviation, Government of India.

'We are trying to make it more institutional to really scale up CLSS. So far, nearly 48,000 households have been disbursed interest subsidy of about Rs 920 crore under CLSS. If it really scales up, you can have 500 beneficiaries in one project itself.'

Further, to facilitate the participation of the private sector to fulfil the growing demand for affordable housing, the Ministry of Housing & Urban Poverty Alleviation has prepared a 'Draft Model Public Private Partnership Policy for Affordable Housing in India'. It will soon issue supplementary guidelines to enable private investment in affordable housing even on private lands under the 'Affordable Housing in Partnership' component of the PMAY (Urban). 'We are trying to encourage states to have more private participation and are sharing some more PPP models with them,' adds Mishra. 'We are encouraging the development of affordable housing projects on private lands. We are also working on a single-window clearance system in states to enhance this.'

Here's a performance overview of CLSS under PMAY:
Subsidy disbursement: Rs 920 crore
No. of households: Over 47,000
Total no. of states and UTs covered: 30
No. of PLIs that have signed MoU with NHB: 170
No. of sensitisation workshops: 17.


Rs.798 crore Bangalore Metro contract awarded to HCC-URCC JV
Infrastructure major Hindustan Construction Company (HCC), a lead partner in the JV with URC Construction, has been awarded a Rs 797.29 crore contract by the Bangalore Metro Rail Corporation. HCC's share in the JV is 51 per cent (Rs 406.61 crore). The project is estimated to be completed in 36 months.

The contract is for the construction of a 6.340-km-long elevated corridor and five elevated stations between HSR Layout station and RV Road station. The five stations on this section are Central Silk Board, BTM Layout, Jayadeva Hospital, Ragigudda and RV Road. The contract also includes the construction of road-cum-rail flyover, road widening and allied works. This is part of the fully elevated 18.82 km RV Road to Bommasandra section of the Phase-II of the Bangalore Metro Rail project. The total length of Phase-II is 72.095 km, of which, 13.79 km is underground. This phase has six sections with 61 stations, of which, 12 stations are underground.

Arun Karambelkar, President & CEO-E&C, HCC, says, 'Our expertise in metro construction has been instrumental in HCC bagging this prestigious contract. We are confident of completing the project well on time as we plan to go on with our task in a systematic and efficient manner. Once completed, this project will benefit thousands of Bangalore residents.'

Infrastructure status for hotel projects over Rs.50 crore
The Union Ministry of Tourism has reportedly proposed to accord infrastructure status to hotel projects costing in excess of Rs 50 crore. According to reports, the Ministry has already circulated a note to the Cabinet to bring down the threshold level for hotels to about Rs 50 crore, for which it is hopeful of getting a Cabinet pass. This proposal, if approved, will lower the threshold limit from the current Rs 200 crore for hotel projects to qualify for priority lending.

With this, there is a great potential opportunity for smaller players to enter and invest in the hotel industry. As Nirupa Shankar, Director, Brigade Hospitality, says, 'This is a good move and should encourage more players to develop good quality three-star hotels or higher. The Rs 50-crore threshold makes it a lot more feasible to develop hotels on a larger scale. The Rs 200-crore threshold would apply to extremely few players and would not be much of an incentive to many. It would also encourage players only in the five-star luxury space, whereas at the Rs 50-crore threshold, high quality three-star hotels can also be built.'

Decreasing the threshold limit comes from a need to bridge the shortage of around 1 lakh classified hotel rooms in the country by enabling smaller investors to build hotels.


GST: Leading to ease of doing business, but compliance a headache Being pegged as a revolutionary tax reform since Independence, the Goods and Services Tax (GST) is likely to eliminate the complex and ambiguous tax structure plaguing the country currently.

Priyajit Ghosh, Partner (Indirect Tax), KPMG, says, 'The government has agreed to take a lenient view for the first couple of months. It has said that a detailed return need not be filed by traders or businessmen, only a summary return would suffice. Post-GST, some tax issues will become easier to handle as there will be no overlapping jurisdiction between the Centre and states with regards to levies. Therefore, seeking redressal of a taxation issue will be far easier, because in the new regime the same rule will apply to everyone.'

Further, Deepak Kapoor, Director, Gulshan Homez, makes a point: 'GST is a reality. We must try to lean it, enjoy it, and implement it in the right perspective. Multiplicity of rates in the previous regime had created a lot of confusion.

Test marketing should have been carried out by the government in select cities or states to ascertain the good and the bad side of it. Making real estate transactions in the transition period will lead to ambiguity on how will ITC be calculated when the new law kicks in? Post July 1, 2017, if an invoice for a unit has to be made, how will calculations be arrived at? If a customer wants to buy a real estate product on July 1, what should I tell him? Should I tell him that I am selling you my real estate but the actual price will be revealed after three to six months, when I get my ITC details? Clarity in communication from the government is important but eventually we will come out victorious.'

Tina Rawla, Director (Finance), Hines India, adds, 'GST has sent a strong positive message about ease of doing business. Whether or not it will influence investment decision and foreign investment remains to be seen. Teething issues such as self-invoicing and unregistered vendors, inflationary pressures and certain short-term adverse impact will make compliance difficult in the first 12-15 months. But global precedence says that GST has been beneficial.'

According to Gaurav Rakyan, Managing Director, Rising Straits Capital, 'GST is a game-changer. It is the right thing to do but developers are not ready. On the top of it, the timing coincides with another big regulatory change, ie, RERA. So, short-term teething issues and inflationary pressures will make compliance difficult. What will happen in the next 12-15 months is difficult to predict. In such a scenario, handholding by consultants is required.'

Metro-rail to boost construction order book by Rs.75,000-90,000 crore
The metro rail sector has seen strong traction in the past couple of years and growth of the metro network in new cities is expected to provide sizeable opportunities for construction companies owing to a strong pipeline of projects that are in the approval or planning stage. According to rating agency ICRA, this is expected to boost the order book of construction companies by Rs 75,000-90,000 crore over the next three to five years. 'Roads and urban infrastructure, including metro rail, are two key segments that have witnessed robust order inflows for construction companies,' says K Ravichandran, Senior Vice President and Group Head, Corporate Ratings, ICRA. 'Further, with a sizeable pipeline of projects in these segments, the construction sector is expected to have sufficient order inflows, and companies with a strong track record and healthy balance sheet are expected to exhibit strong growth going forward.'

Metro rail development is being planned in over 30 Indian cities. A metro rail network is currently operational or partly operational in nine cities, while another five have metro projects under implementation. In addition to the extension of the network in these cities, a new metro rail is to be developed in another 15-20 cities. According to ICRA, the overall cost of expansion of operational or under implementation approved metro projects is over Rs 2.5 lakh crore, thus supporting the order books of construction contractors. Further, metro rail projects worth another Rs 2 lakh crore are in various stages of approval and are likely to come up for bidding within the next five years.

With PPPs being limited in the metro rail sector, only five such projects have been taken up on this mode. According to the agency, there are currently three operational PPP-based metro projects (one in Mumbai, and two in Gurugram), while one project is under implementation (Hyderabad Metro). Not surprisingly, several large Indian construction companies have taken up projects in the metro rail sector.

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