Over the last three years, the government has made an effort to contribute directly and indirectly to the enhancement of the quality of India’s infrastructure, which can be witnessed by the incremental capital spending by the government. In FY17-18 Budget, capital allocations made at its highest level of Rs 3.96 lakh crore. The average pace of national highways built has gone up sharply to the 22 km/day from 6-9 km/day since this government came to power.
Despite a slow start, progress has been made, and according to data released recently for nearly 1200 projects reviewed by the PMO, the fraction of projects delayed had come down to 25 per cent from 43 per cent a year ago, and the average cost overrun has come down to 11 per cent from 20 per cent a year ago which is commendable. Government de-bottlenecked the infrastructure projects, which were stalled due to some or other issues, but few matters still persist and the biggest of them is land acquisition, which leads to delay in the awarding process.
Apart from the roads & highways, in the last two budgets the government has given a major thrust on rural infrastructure, smart cities, real estate (Housing For All) and post-harvest infrastructure. Also, the government has sorted out the taxation issues lingering around InvITs/REITs which started showing results. Two infrastructure companies got listed with this new product offering and more in the pipeline. Now with InvITs/ REIT came to reality will help companies to monetise their asset, lighten their balance sheet and fund future business growth.
Apart from execution front, the government has also made strides on the legislative front. The decision to accord infrastructure status to “Affordable Housing” could be a game-changer. Along with the infrastructure status to the affordable housing segment, amendments & implementation of the Real Estate Regulation Act (RERA) will flip the negativity and bring the Real estate to centrestage. To outline few amendments switch from the build up to carpet area, full disclosure and approval required to launching projects, maintaining balance in escrow account for each project, penalties on late delivery etc. This will bring in much required transparency and trust of the homebuyers in the system.
As real estate being a state subject, the Centre can only define a model code and the actual implementation is left to the wisdom of the states. Apparently what has happened in this case is that states have diluted these provisions in favour of builders. For example certain states have kept existing and ongoing projects outside the ambit of RERA, largely diluting its impact. Out of the 14 states and UTs that have so far notified the RERA rules, there has been some element of dilution in most of the states. In a nutshell, with the diluted version and limited implementation, it is uncertain how impactful the RERA will be on pan-India basis.
Almost two years after the NDA government’s flagship mission to develop 100 smart cities was launched, progress in the 60 cities selected so far is yet to pick up pace. Of the 731 smart city projects worth Rs 46,366 crore approved so far, implementation has started in 49 (6.7 per cent). And 24 projects (3.3 per cent) have been completed as of January 2017.
According to figures on Ministry’s website, 49.5 per cent projects are yet to begin. Of the 60 cities selected so far, projects have started on the ground in the first batch of 20 chosen by the ministry. Work is yet to take off in 40 cities that were selected in September 2016. India plans to have 100 such cities by 2022. While 60 have been chosen so far, the ministry plans to select the remaining 40 by June 2017. Building altogether new smart cities is easier but upgrading the existing to match that standard is a Herculean task. Even though pace is little slower in front of the aspirations, things have actually started moving on grounds. It will start showing results in coming years and can expect to see better quality infrastructure in future.
The writer is senior equity research analyst, Angel Broking
