“A leader is a dealer in hope.”
– Napoleon Bonaparte
India has rolled out the Covid-19 vaccine and a million people will have received the first shot by the time this article is published. On 20 January, India also gifted the vaccine to its neighbouring countries, including Bhutan, Maldives, Nepal, Myanmar and Bangladesh. Within the next two months, India will vaccinate almost all its citizens above fifty years of age and all the corona warriors. These vaccines have been developed indigenously and the Prime Minister has visited all three facilities involved in the process. India could do so much because of the inspired leadership provided by PM Narendra Modi. Though there have been occasional lapses in the machinery, we have to give credit for all the achievements to the PM and his team along with the lakhs of healthcare workers, police personnel and government employees who worked hard through the pandemic while risking their lives.
The country is returning to normalcy gradually and business is down but ticking. As people are looking up to the leadership in these testing times, a monumental challenge which lies ahead for the government is the creation of millions of jobs for the skilled and unskilled workers who lost their livelihoods during the pandemic, many of them the sole breadwinners for their families. The manufacturing sector has its limitations and won’t be able to provide new jobs immediately. But it is time for the government to create opportunities in infrastructure development where there is immense scope.
Our infrastructure does not stand in comparison to that in other developed nations of Asia. The sector is also reeling under a crisis—it was hit badly by the slump after demonetisation and GST implementation and Covid-19 worsened the misery. Thus, it is the right time now to pump money into the sector and build world-class infrastructure for roads, railways and air travel. Remember, the Great Depression in the 1930s made the US what it is today. It is a perfect example of turning a crisis into an opportunity—an art which has been mastered by PM Modi.
As the Budget Session is about to begin, here are a few points which can be considered for revamping real estate and infrastructure projects to help companies generate employment. Infrastructure is the second most employment-centric industry after agriculture. Companies are under the immense pressure of liquidity as salaries and establishment costs during the pandemic have squeezed them dry. The government needs to help them with special packages to get out of this slump and consider the following points:
One, the cost of all raw materials has risen by 30-40% because of Covid-19 protocols and production cuts. The production cuts have increased the costs of steel, cement, PVC and HDPE resins which have directly increased the capital and cost of finance. This situation has brought a severe crisis for infrastructure companies. The government needs to consider the cost fluctuation as per market conditions, not with the RBI basis points. Otherwise, many contractors will face bankruptcy and many will lose jobs.
Two, low interest, easy finances and subsidies in direct and indirect taxes could be a good option for construction companies and real estate developers.
Three, a project like DMIC can play a vital role in generating employment. These projects can be put on the fast track to generate employment and pump in the liquidity required for a dried-up system. It will help migration in a big way too and the ultimate purpose of DMIC will be achieved.
Four, circle rates of land must be revised to current market rates in urban and rural areas. The gap between circle rates and market prices is 1:20 in ratio. It will help wipe out black money and multiply the stamp duty collection for the government exchequer. The real cost of land will help the developers get adequate finances from legitimate sources to fund their projects.
Five, activities of land use regulation and permission are the main causes for delay in real estate projects. The process should be fully digitalised and timely clearances of permissions should be ensured. It will minimise the interest cost on capital as both real estate and infrastructure are capital intensive businesses.
Six, RERA has brought great credibility to the real estate business, but it should not go the GST way just because of the complicated system. The process and standard compliances should be simplified. Each sector should have specific standards. It has the same format for open plots, residential buildings and industrial plots right now, although all of them have separate characteristics. They should be dealt with accordingly, not with a common format.
Seven, the subsidized affordable housing scheme is a great success under the Pradhan Mantri Awas Yojana. We can put more funds into these projects to boost the economy and achieve the target of Housing for All by 2022. Provision for greater subsidies will mitigate the impact of the raw material cost increase on these projects and more people will tend to buy. More such projects will create more jobs as well.
Eight, more projects for the interlinking of rivers and conversion of open water canals to pipelines should be proposed. It will help conserve water and generate employment in rural areas.
Nine, Expressways connecting landlocked state capitals to seaports should be proposed. Foodgrains from Punjab, Haryana, Uttar Pradesh and Bihar can fetch good prices by export if they have good mobility and access to ports like Kandla, Mundra and Nhava Sheva on the western coast and other seaports on the eastern coast.
Since real estate caters to a basic need of humans, it needs to be affordable. The high cost of raw materials has destroyed all the equations between developers and new buyers. The infrastructure projects are EPC projects; hence, the rise of the raw material costs will halt progress and put the agencies in a fix. If the government does not intervene timely, many of them might even withdraw from the projects and file for bankruptcy, which will not be good for any stakeholder, be it the company, the government, bankers or workers.
The above issues can be managed by the government if it wishes to do so. Moreover, the abolition of the GST for two years will see a seamless completion of existing projects. Ease of doing business also needs upgradation of technology in government departments and will give great dividends to all the stakeholders, including the government. The real estate and infrastructure sectors are looking up to PM Modi and Finance Minister Nirmala Sitharaman, hoping for timely and needed help. May good sense prevail.
The writer is Research Scholar, Sardar Vallabhbhai National Institute of Technology, Surat. The views expressed are personal.