From Ventilator to Victory
Today, the world is in lockdown with economies grappling with the disruption caused by the COVID-19 pandemic.The suspension of economic activities pursuant to the lockdown in India has impacted industries across the economy, including the construction and real estate sectors.
After agriculture, the construction, infrastructure and real estate sectors are the second-largest employment providers in the country. The Indian construction industry hires over 49 million people, approximately about 12 per cent of the nation's working population, and in 2019 contributed to around 8.7 per cent of the country’s GDP. The sector was expected to contribute to around 13 per cent to the country’s GDP by 2025, according to an IBEF report.
Construction activity in progressTotal projects aggregating to about Rs 59,000 billion are under development in India (Reference: Report of the Task Force on National Infrastructure Pipeline for 2019-2025 issued by the Finance Minister in December 2019). Owing to COVID-19, construction sites have witnessed suspension of work with the fear of infection keeping migrant workers away.
While the Government has permitted construction activity to resume (with precautions) in rural areas and outside city and municipal limits and industrial parks, construction activity has not been allowed in hotspots.
Also read: Construction in the Time of COVID
The lockdown has added to the existing challenges of the industry, which include:
The challenges facing the sector are significant, leading many to expand the pandemic’s abbreviation COVID-19 as Construction OnVentilator and In Distress. However, there is light at the end of the tunnel—the Government has taken measures to address the situation, as elaborated below.
Government measures initiated to remedy the crisis
Waiver of additional 10 per cent payment till December 31, 2020, under the ‘Vivaad se Vishwas’ scheme
Reduction in interest payable on delay in deposit of TDS and TCS
Reduction in TDS rates for non-salaried specified residents, by 25 per cent of the existing rates.
The Government has indicated that no global tenders will be invited for construction works up to Rs 2 billion, to promote the Prime Minister’s vision of ‘Vocal for Local with Global Outreach’
Extension of up to six months (without costs to contractor) by all central agencies (such as Railways, Ministry of Road Transport & Highways, Central Public Works Dept, etc)
Covers construction/works and goods andservices contracts
Covers obligations like completion of work, intermediate milestones, etc, and extension of concession period in PPP contracts
Government agencies to partially release bankguarantees to ease cash flows
Ministry of Housing and Urban Affairs to advise states/UTs and their regulatory authorities to:
Treat COVID-19 as an event of force majeure under RERA
Extend the registration and completion date suo moto by six months for all registered projects expiring on or after 25 March, 2020 without individual applications; this may be further extended by three months
Rs 25 billion Employee Provident Fund (EPF) support for business and workers for three more months (i.e.from June to August 2020; benefit already granted for March to May 2020).
The efforts undertaken by the Government to ease the pain are commendable. In line with the message of the Prime Minister, ‘JaanBhiJahaanBhi’, the Government may consider additional measures to support the industry, as listed below.
Additional measures the Government may consider to help the sector
The above areas are indicative and there could be several other aspects that need attention.
Indeed, the Government is doing well in providing relaxations and benefits. The aspects listed above may also be considered as they will contribute in a focused way to the construction and real-estate industry. With these measures, it is hoped that the country will be able to counter the pandemic and change the intended meaning of the abbreviation to Construction in Victory Dance!
About the authors:
Vijay Dhingra is a Partner at Deloitte Haskins and Sells LLP. He has over 19 years of experience in the field of direct taxes, international taxation, corporate laws and exchange control regulations.
Parul Shah is a Manager and Nikhil Sangtani is a Deputy Manager with the firm.
- construction sector
- economic activities
- real estate
- infrastructure and real estate
- Indian construction industry
- construction activity
- industrial parks
- raw material
- migrant workers
- new projects
- Reserve Bank of India
- direct benefit transfer
- Atmanirbhar Bharat
- construction workers
- migrant construction
- Vivaad se Vishwas
- Ministry of Road Transport & Highways
- Central Public Works Dept
- in PPP contracts
- force majeure
- raw material