Budget 2012: What to expect for marine infra, realty & SEZs

By GRK Reddy, Chairman & MD, MARG Group
 
With a slowing economy, high interest rates and need to speed up decision making towards infra projects, I expect a positive attempt in this Budget to push private investment and accelerate infrastructure spending. Certain proactive measures in this regard can be:

• Exempting infrastructure companies and SEZ units from MAT provisions
• Relaxation of norms on long term funds (insurance and pension) to invest in the infrastructure sector
• Permitting banks to issue long term tax-free infrastructure bonds, thereby enhancing the participation of banks, financial institutions and large NBFCs

Marine Infrastructure: The privatization of ports in the country has begun in the right earnest and it is now imperative that the Government works out a supportive mechanism particularly for:

• Dredging (which is highly capital intensive)
• Connectivity by road & rail

Even though private ports are creating additional capacities, it is critical for the above 2 issues to get adequate representation in the Budget. As per the maritime agenda, a 3 billion capacity is required to be created by 2020 with a sizable portion of investment expected from private sector. This can only be possible if this sector gets infrastructure and funding support.

Real Estate: The real estate sector is in a state of turmoil on account of high interest rates and inflationary pressures among other factors. In this scenario, impetus from the Government in the form of budgetary provisions to spur demand for residential & commercial real estate will augur well for this sector:

• The scope of the 1% interest rate subsidy should be broadened to include housing loans upto Rs. 20 lakh
• Declare housing as infrastructure and bring it under Section 80IA of Income Tax Act
• Incentives to promote affordable housing - Increase allocation to Rajiv Awas Yojana (RAY) for urban housing targeted at the EWS and the LIG sections
• Tax exemption limit to be hiked to Rs. 3 lakh against interest paid on housing loans
• Relax FDI upto 51% in multi-brand retail to create demand for retail space in shopping malls

SEZ:

• Exemption from the MAT levy will certainly be a positive measure to bring relief to the sector
• The implementation of the revised Direct Tax Code (DTC) draft will have strong implications on SEZs as it does not allow tax benefits to new units. The industry requires clarity on the issues that may emerge and how businesses would be promoted in Special Economic Zones

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