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Focus is on rural housing
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The subsidy for building houses in backward areas has been increased in the Budget, and there are incentives for women too, says K. Sukumaran
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Incentives: Building houses in rural areas set to become easier.
It is budget time again. The Union Finance Minister, P. Chidambaram, has presented his seventh Central budget — fourth in a row under the United Progressive Alliance (UPA) Government — in Parliament. All the States will also be presenting their budget in the next few weeks, except Karnataka, where it will be introduced by the Finance Minister himself as the State is under President’s Rule. As we all know, budgets dictate the growth graph of the country
217;s economy, as expenditure and revenue are determined by the proposals contained in the budgets. In recent times, budgets have been guided by the policies and programmes of the party/parties in power. In the present case, the Common Minimum Programme (CMP) of the United Progressive Alliance (UPA) is the policy plank of the FM’s budget. The UPA has many flagship programmes through which ‘Bharat Nirman” has been aimed at.
The present budget has been acclaimed as a ‘middle class budget’ and stated to be benign to the ‘aam admi.’ This being the case, it goes without saying that the most important subject of infrastructure, particularly housing, should have received more than ordinary attention. No road blocks have been created in this area but there are only a few proposals of interest.
Infrastructure
Building up of infrastructure is an ongoing programme. The Government is to provide Rs. 16,436 crore as equity support and Rs. 3,003 crore as loans to Central Public Sector Enterprises (CPSEs) during the year 2008-09. 44 CPSEs are listed already and more are expected to be listed in order to unlock their true value and improve corporate governance. The accent in the budget is more on rural areas. Urban infrastructure development is mainly through the Jawaharlal Nehru National Urban Renewable Mission (JNNURM). The Rural Infrastructure Development Fund (RIDF) is the main instrument for channelising bank funds for financing rural infrastructure. The FM has proposed to raise the corpus of RIDF IV in 2008-09 to Rs. 14,000 crore. It is also proposed to operate a separate window under RIDF IV for rural roads with a corpus of Rs. 4,000 crore.
Developing housing for poor being one of the six programmes under Bharat Nirman, the central theme has been rural housing under the Indira Awas Yojana (IAY). Loans from commercial banks for this purpose will be made available at Differential Interest Rate of four per cent up to Rs. 20,000 per unit.
The subsidy available has been hiked from Rs. 25,000 to Rs. 35,000 in the plains and Rs. 38,500 in hilly and difficult areas. This is expected to give further fillip to rural housing. The subsidy for upgradation of houses has been proposed to be increased from Rs. 12,500 to Rs. 15,000. In order to help women, houses constructed under the IAY should be allotted to a female member of the family or in the joint names of husband and wife. Only when there are no female members in a household should the allotment be made in the name of a male member. An annual outlay of Rs. 5,400 crore has been made to this segment. Three per cent of the funds of rural outlay will go to the disabled.
Urban housing
An outlay of Rs. 5,478.36 crore has been made for urban housing, with the National Capital Region of Delhi getting Rs. 2,978.36 crore. This will be spent on housing and other infrastructure for holding the 2010 Commonwealth Games. Allocation has also been made for the Delhi, Bangalore and Kolkata metros.
In order to refinance rural housing loans, the National Housing Bank (NHB) has been provided Rs. 1,200 crore.
Housing has many other components such as input cost, stamp duty and registration charges, service charges, interest on loans etc. Many of these areas have been untouched by the current budget. The excise duty on bulk cement has been revised from Rs. 400 per tonne in 2007-08 to Rs. 400 per tonne or 14 per cent ad valorem, whichever is higher, for 2008-09. This proposal is expected to increase the cost of bulk cement for consumers such as ready mix concrete producers, infrastructural companies and large builders, who account for about 10-15 per cent of the total cement consumption. The producers are likely to pass on this increase to consumers, thus increasing the housing prices.
Increasing global operating cost, coupled with the rising prices of coke and iron ore, are expected to push up global steel prices. The reduction from 16 to 14 per cent in CENVAT rates may counter- balance this and reduce the tonnage rate by around Rs. 500, leading to reduction in steel prices.
The excise duty on sales in MODVAT may neutralise the price as far as the industrial buyer is concerned.
Outlook
The overall proposals may perhaps leave the infrastructural and housing segments in an ‘as is where is’ situation, except, of course the rural segment.
To know the full impact, we may have to wait for the State budgets as the parties in power in the States may have their own agenda to balance economics and politics.
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