5/31/2018 CONSTRUCTION - Make In India

CONSTRUCTION
SUMMARY
USD 650 Billion investments in urban infrastructure estimated over next 20 years.
100% Foreign Direct Investment (FDI) permitted through the automatic route for townships, cities.
Dedicated Fund for Affordable Housing under National Housing Bank.
Identification of 99 Smart Cities, having an outlay of USD 31.38 billion.

REASONS TO INVEST
Construction sector in India will remain buoyant due to increased demand from real estate and infrastructure
projects.
USD 650 Billion will be required for urban infrastructure over the next 20 years.
India’s real estate market is expected to reach a market size of USD 180 billion by 2020.
India to be third largest construction market globally by 2030, with its contribution to GDP increasing to 15% by
2030.
Size of the India’s construction industry expected to be USD 1 trillion by 2025.
Construction Industry is poised to become the largest employer by 2022, employing more than 75 million people.
Some of the large government projects offer significant up-side thrust.
As India’s urban GDP is expected to reach USD 7.5 trillion by 2030, accruing 75% of India’s total GDP. , the
country needs to develop over 170 million houses until 2030.
Present levels of urban infrastructure are inadequate to meet the demands of the existing urban population. There is
need for re-generation of urban areas in existing cities and the creation of new, inclusive smart cities to meet the
demands of increasing population and migration from rural to urban areas. Future cities of India will require smart
real estate and urban infrastructure.
To provide quality urban services on a sustainable basis in Indian cities, the need of the hour is that urban local
bodies (ULBs) enter into partnership agreements with foreign players, either through joint ventures, private sector
partners or through other models.
Key drivers of real estate sector-regulatory reforms, steady demand generated due to rapid urbanization, rising
household income and rising number of nuclear families.

STATISTICS

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As per the second advance estimates for the year 2017-18, GVA (at basic prices) by the construction sector stood at
USD 140 billion . It is estimated to register a growth rate of 4.3% in 2017-18 as compared to 1.3% in 2016-17.
Share of infrastructure spending in the construction sector as a part of India’s GDP rose to 9% in 2017.
Investment in retail projects in Tier 1 & 2 cities reached USD 6.19 billion from 2006-17.
During the last three years, over 7.1 million houses have already been completed which include 1.7 million under
Pradhan Mantri Awas Yojana(Gramin) houses.
Second largest employer, after agriculture sector, employing more than 35 Million people.

FDI POLICY
Construction - Development projects (which include development of townships, construction of
residential/commercial premises, road or bridges, hotels, resorts, hospitals, educational institutes, recreational
facilities, city and regional level infrastructure, townships) - 100% FDI through automatic route is permitted.
FDI Limit for real estate projects within Special Economic Zones (SEZs) raised to 100%.
100% FDI allowed for single brand retail trading and construction development segment (which includes townships,
housing, built-up infrastructure) under automatic route.

FDI Policy for Industrial Parks:

100% FDI is allowed under the automatic route. ‘Industrial Park’ is a project in which quality infrastructure in the
form of plots of developed land or built-up space or a combination with common facilities is developed and made
available to all the allottee units for the purposes of industrial activity.
(However, Investment is subject to some conditions for the above mentioned activities)

SECTOR POLICY
Smart Cities Mission
Under 100 Smart Cities Mission, Smart Cities were selected through a ‘City Challenge Competition,’ linking
financing and ability to achieve multidimensional objectives of urban infrastructure development like adequate and
clean water supply, sanitation and solid waste management, efficient urban mobility and public transportation,
affordable housing for the poor, power supply, robust IT connectivity, governance, especially e-governance and
citizen participation, safety and security of citizens, health and education and sustainable urban environment. Smart
City mission has been implemented through Special purpose Vehicles (SPV) to be managed by the state government.
Till date, 99 cities have been identified, with an outlay of USD 31.38 billion . The scheme is projected to positively
impact 99 million of urban population.
82 Special Purpose Vehicles (SPVs) have been formed.

Atal Mission for Rejuvenation and Urban Transformation (AMRUT):

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The mission is interlinked to the Smart City Mission, adopting a project approach to ensure basic infrastructure
services relating to water supply, sewerage, septage management, storm water drains, transport and development of
green spaces .
State level plans of USD 11 billion for 500 cities have been approved. Uttar Pradesh has got the highest investment
under the Atal Mission of USD 1.75 billion. This is followed by : Tamil Nadu(USD 1.72 billion), Maharashtra(USD
1.03 billion), Haryana(USD 0.39 billion), Chattisgarh(USD 0.33 billion), Manipur(USD 27 million), Sikkim(USD 6
million) .
Water supply contracts for 494 projects worth USD 2.98 billion and sewerage work contract for 272 projects costing
USD 1.91 billion have been awarded.
482 cities have started Credit rating and 144 cities have got investment grade rating.

Swachh Bharat Mission (SBM):

SBM aimed at elimination of open defecation, eradication of manual scavenging, scientific Municipal Solid Waste
Management, to effect behavioural change regarding healthy sanitation practices, and generate awareness about
sanitation and its linkage with public health, capacity augmentation for ULBs to create an enabling environment for
private sector participation in Capex (capital expenditure) and Opex (operation and maintenance).
The estimated cost of implementation of Swach Bharat Mission (Urban) is USD 9.53 billion, of which Government
of India’s share is to be USD 2.27 billion. The contribution of State and Union Territories stands at USD 0.74 billion.
Few indicators reflecting success of the programme are:
3.9 million Individual and 0.30 million Community and Public Toilets built.
2322 cities are now open defecation free
88.4 MW of energy produced from current waste.

Heritage City Development and Augmentation Yojana (HRIDAY):

HRIDAY aimed at preserving and revitalizing the soul of 12 Indian heritage cities, namely, Ajmer, Amaravati,
Amritsar, Badami, Dwarka, Gaya, Kanchipuram, Mathura, Puri, Varanasi, Velankanni and Warangal.
HRIDAY National Empowered Committee (HNEC) has approved USD 61.53 million for all the twelve cities
identified under the plan.
The development support provided to heritage infrastructure projects includes development of water supply,
sanitation, drainage, waste management, approach roads, footpaths, street lights, tourist conveniences, electricity
wiring, landscaping and such citizen services.

Implications of GST Regime:

Under the GST regime, all under-construction properties are to be charged at 8% (excluding stamp duty and
registration charges).
GST is not applicable to completed and ready-to-move-in projects, as there are no indirect taxes applicable in the
sale of such properties.
On account of GST, reduction in prices is estimated to be around 3-4 %.

Real Estate Regulation Act:

The Real Estate sector involving over 76,000 companies comes into the ambit of regulation from May’2017. Under
the Act, each state and Union territory will have its own regulator and set of rules to govern the functioning of the
regulator.
The Act that came into force from May’2017, is considered to be the most significant reform.

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FINANCIAL SUPPORT
State Incentives:
Apart from the above, each state in India offers additional incentives for investments and special incentive packages
for mega projects.

Incentives for developing SEZ/EMC's/Other Sectoral Clusters:

The major incentives and facilities available to SEZ developers include:
Exemption from customs/excise duties for development of SEZs for authorised operations approved by the BOA.
Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years, in 15
years under Section 80-IAB of the Income Tax Act.
Exemption from Central Sales Tax (CST).
Exemption from Service Tax (Section 7, 26 and the Second Schedule of the SEZ Act).

Incentives for developing electronic manufacturing clusters:

Brownfield EMC: The assistance will be restricted to 75% of project costs, subject to the ceiling of INR 0.5 Billion.
The remaining project cost will be financed by other stakeholders of the EMC with a minimum industry contribution
of 15% of the project cost.
Greenfield EMC: The assistance will be restricted to 50% of the project cost subject to ceiling of INR 0.5 Billion for
every 100 acres of land. The remaining project cost shall be financed by other stakeholders of EMC with a minimum
industry contribution of 25% of the project cost.
The administrative expenses are to be restricted to 3% of the central assistance in the project. Expenses towards the
preparation of a detailed project report will also be considered a part of project cost.

Area based Incentives:

Incentives for units in SEZ/NIMZ as specified in respective acts or the setting up of projects in special areas such as
the North-east, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.

KEY POINTS IN UNION BUDGET 2018-19:

An Internal and Extra Budgetary Resource of USD 2 billion has been allocated under Union Budget 2018-19 to
Housing and Urban Development Corporation.
Under PMAY (Urban), a social welfare flagship programme of Government of India, a Gross Budgetary Support of
USD 1 billion is allocated under the present budget. Further, an Internal and Extra Budgetary Resource of USD 3.84
billion is also given.
To achieve the target set to provide Housing for All by 2022, more than one crore houses to be built by 2019 in rural
areas.
Setting up of a dedicated fund for affordable housing under the National Housing Bank to be funded by priority
sector lending shortfall and fully serviced government authorized bonds.

INVESTMENT OPPORTUNITIES

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5/31/2018 CONSTRUCTION - Make In India

Construction development in residential, retail, commercial and hospitality sectors.

Technologies and solutions for smart sustainable cities and integrated townships.
Technologies for the promotion of low cost and affordable housing.
Green building solutions.
Sustainable and environmentally friendly building materials.
Training and skill development of construction sector workers.
Urban water supply, urban sewerage and sewage treatment.

FOREIGN INVESTORS
Hines (USA)
Veolia (France)
Ascendas (Singapore)
Aqualyng AS (Norway)
Tishman Speyer (USA)
Emaar Properties (UAE)
The Trump Organization (USA)
Alstom (France)
Hydro-Comp Enterprises (Cyprus)
GIZ (Germany)

SOURCES
India’s real estate market is expected to reach a market size of USD 180 billion by 2020.
India to be third largest construction market globally by 2030, with its contribution to GDP increasing to 15% by
2030.
Size of the India’s construction industry expected to be USD 1 trillion by 2025.
Construction Industry is poised to become the largest employer by 2022, employing more than 75 million people.
As India’s urban GDP is expected to reach USD 7.5 trillion by 2030, accruing 75% of India’s total GDP.
Key drivers of real estate sector-regulatory reforms, steady demand generated due to rapid urbanization, rising
household income and rising number of nuclear families.
As per the second advance estimates for the year 2017-18, GVA (at basic prices) by the construction sector stood at
USD 140 billion . It is estimated to register a growth rate of 4.3% in 2017-18 as compared to 1.3% in 2016-17.
Share of construction sector infrastructure spending as a part of India’s GDP rose to 9% in 2017.
Investment in retail projects in Tier 1 & 2 cities reached USD 6.19 billion from 2006-17.
During the last three years, over 7.1 million houses have already been completed which include 1.7 million under
Pradhan Mantri Awas Yojana(Gramin) houses.
Second largest employer, after agriculture sector, employing more than 35 Million people.
Key drivers of real estate sector-regulatory reforms, steady demand generated due to rapid urbanization, rising
household income and rising number of nuclear families.
http://www.makeinindia.com/sector/construction 5/7
5/31/2018 CONSTRUCTION - Make In India

FDI Limit for real estate projects within Special Economic Zones (SEZs) raised to 100%.
100% FDI allowed for single brand retail trading and construction development segment (which includes townships,
housing, built-up infrastructure) under automatic route.
100% FDI is allowed under the automatic route. ‘Industrial Park’ is a project in which quality infrastructure in the
form of plots of developed land or built-up space or a combination with common facilities is developed and made
available to all the allottee units for the purposes of industrial activity. (However, Investment is subject to some
conditions for the above mentioned activities)
Till date, 99 cities have been identified, with an outlay of USD 31.38 billion The scheme is projected to positively
impact 99 million of urban population.
82 Special Purpose Vehicles (SPVs) have been formed.
The mission is interlinked to the Smart City Mission, adopting a project approach to ensure basic infrastructure
services relating to water supply, sewerage, septage management, storm water drains, transport and development of
green spaces .
State level plans of USD 11 billion for 500 cities have been approved. Uttar Pradesh has got the highest investment
under the Atal Mission of USD 1.75 billion. This is followed by : Tamil Nadu(USD 1.72 billion), Maharashtra(USD
1.03 billion), Haryana(USD 0.39 billion), Chattisgarh(USD 0.33 billion), Manipur(USD 27 million), Sikkim(USD 6
million) .
482 cities have started Credit rating and 144 cities have got investment grade rating.
The estimated cost of implementation of Swach Bharat Mission (Urban) is USD 9.53 billion, of which Government
of India’s share is to be USD 2.27 billion. The contribution of State and Union Territories stands at USD 0.74 billion.
3.9 million Individual and 0.30 million Community and Public Toilets built, 2322 cities are now open defecation
free, 88.4 MW of energy produced from current waste.
HRIDAY aimed at preserving and revitalizing the soul of 12 Indian heritage cities, namely, Ajmer, Amaravati,
Amritsar, Badami, Dwarka, Gaya, Kanchipuram, Mathura, Puri, Varanasi, Velankanni and Warangal.
HRIDAY National Empowered Committee (HNEC) has approved USD 61.53 million for all the twelve cities
identified under the plan.
The development support provided to heritage infrastructure projects includes development of water supply,
sanitation, drainage, waste management, approach roads, footpaths, street lights, tourist conveniences, electricity
wiring, landscaping and such citizen services.
Under the GST regime, all under-construction properties are to be charged at 8% (excluding stamp duty and
registration charges).
GST is not applicable to completed and ready-to-move-in projects, as there are no indirect taxes applicable in the
sale of such properties.
On account of GST, reduction in prices is estimated to be around 3-4 %.
The Act that came into force from May’2017, is considered to be the most significant reform.
An Internal and Extra Budgetary Resource of USD 2 billion has been allocated under Union Budget 2018-19 to
Housing and Urban Development Corporation.
Under PMAY (Urban), a social welfare flagship programme of Government of India, a Gross Budgetary Support of
USD 1 billion is allocated under the present budget. Further, an Internal and Extra Budgetary Resource of USD 3.84
billion is also given.
To achieve the target set to provide Housing for All by 2022, more than one crore houses to be built by 2019 in rural
areas.
Setting up of a dedicated fund for affordable housing under the National Housing Bank to be funded by priority
sector lending shortfall and fully serviced government authorized bonds.
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