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Indian budget to boost the building industry?

India's budget was announced on Saturday (February 28th) and the many measures outlined within it could have extremely positive effects on the nation's construction industry. While many areas of Indian life will see major investment, a huge amount of money has been allocated to boosting the country's building work.

Prime minister Narendra Modi has a clear vision for his nation, and is prepared to invest trillions of rupees of government money into seeing it become a reality. While some of the goals - such as housing for all by 2022 - seem ambitious, the budget lays out clear plans for how they will be completed.

The measures announced in the budget could also prove beneficial for overseas investors in Indian construction, with indications that regulations that have been obstacles for international firms in the past will be eased and made more transparent.



As predicted, the budget promised a number of measures to improve housebuilding in India, boosting the build and interiors industry. However, many of the approaches that analysts predicted would be taken were not included, replaced by a bolder path of action that could be risky for India.

A scheme has been announced to construct 60 million houses by 2022, and has allocated a massive 140 billion rupees ($2.26 billion) to supporting this project in 2015 and 2016. The average cost of each house is estimated to be around 110,000 rupees, which will pay for a 30 square foot construction complete with power, a drinking water supply and a toilet.

However, while many were expecting the focus of Mr Modi's housebuilding project to be the urban slums of India, the money is actually being directed more towards rural communities. Some 40 million of the new homes will be constructed in the countryside, with the remaining 20 million being built in the city.



Another key aspect of the budget is a renewed focus on infrastructure, with one billion rupees allocated to rural and agricultural projects. While a lot of this funding is going on simple schemes like the construction of roads, a number of larger construction projects are in the works.

For example, approximately one trillion rupees is being allocated to the construction of five 'ultra-mega' power plants. Each of these would have a capacity of 4,000 MW offered on a plug and play model. It is hoped these will be funded by foreign rather than domestic investment, and India Ratings and Research (Ind-Ra) has warned that "the participation of Indian private players could be low".

However, one of the most important aspects of the budget is the announcement that measures will be taken to increase efficiency, reduce red tape and tackle corruption. It is thought that these measures will help to restart the 8.7 trillion rupees worth of infrastructure projects that have currently stalled in India.


International investment

It is hoped that the measures taken will increase investment in India's construction industry from foreign firms. Part of this is due to the plug and play model, which increases clarity on certain aspects of investing.

This improved transparency will be incredibly useful, as India has struggled to attract foreign investment in the past due to confusing regulations that local firms are better able to negotiate. Improvement in this area will help encourage more overseas firms to invest in the country.

Ind-Ra said that more international investment "will bring in the required equity and more technological inputs for timely implementation" of infrastructure projects such as the ultra-mega power plants.

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