The Government recognizes the challenges that this  task entails, particularly at a time when the world is still struggling  with an unprecedented financial crisis and an economic slowdown that  has also affected India. While we are determined to convert our words  into deeds, Members would appreciate that a single Budget Speech cannot  solve all our problems, nor is the Union Budget the only instrument to  do so. Yet, it is an important means to share the vision of the  Government, particularly as we begin a new term. I propose to do just  that for the next hour or so, as I dwell on the challenges and outline  the approach of the government in the short term and medium term  perspectives.
    
                    The first  challenge is  to lead the economy back to the high GDP growth rate of 9 per cent per  annum at the earliest. Growth of income is important in itself, but it  is as important for the resources that it brings in. These resources  provide us with the means to bridge the critical gaps that remain in  our development efforts, particularly with regard to the welfare of the  vulnerable segments of our population.
                   
                    The second  challenge is  to deepen and broaden the agenda for inclusive development; and to  ensure that no individual, community or region is denied the  opportunity to participate in and benefit from the development process.
                   
                    The third  challenge is  to re-energize government and improve delivery mechanisms. Our  institutions must provide high quality public services, security and  the rule of law to all citizens with transparency and accountability.
                   
                    While this year’s budget did not specifically make any mention of  either the housing or the real estate sector, there is some reference  to infrastructure development which impacts on the way the housing and  real estate sector is going to develop.
                   
                    To stimulate public investment in infrastructure, the Government  had  set up the India Infrastructure Finance Company Limited (IIFCL) as a  special purpose vehicle for providing long term financial assistance to  infrastructure projects. ‘Takeout financing’ is an accepted  international practice of releasing long term funds for financing  infrastructure projects.  It can be used to effectively address the  asset liability mismatch of commercial banks arising out of financing  infrastructure projects and also to free up capital for financing new  projects. IIFCL would, in consultation with banks, evolve a ‘takeout  financing’ scheme which could facilitate incremental lending to the  infrastructure sector.
                   
                    Government has had some success in attracting private investment in a  wide range of infrastructure sectors such as telecommunications, power  generation, airports, ports, roads and even in railways through public  private partnerships ( PPP ). To ensure that infrastructure projects do  not face financing difficulties arising from the current downturn, it  was indicated in the Interim Budget Speech that the Government has  decided that IIFCL will refinance 60 per cent of commercial bank loans  for PPP projects in critical sectors over the next fifteen to eighteen  months. The IIFCL and Banks are now in a position to support projects  involving a total investment of Rs.100 thousand crore in  infrastructure.  Combined with the steps we are taking to increase  public investment in infrastructure, this will provide a big boost to  such investment.
                   
                    The Finance Minister believes. “The investment in infrastructure for  the growth of economy is critical.  I have urged my colleagues in the  Central and State Governments to remove policy, regulatory and  institutional bottlenecks for speedy implementation of infrastructure  projects.  I, on my part, will ensure that sufficient funds are made  available for this sector”.
                   
                    The allocation during the current year to National Highways Authority  of India (NHAI) for the National Highways Development Programme (NHDP)  is being stepped up by 23 per cent over the 2008-09 (BE).  The  allocation for the Railways has also been increased from Rs.10,800  crore made in the Interim Budget for 2009-10 to Rs.15,800 crore.
                   
                    The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has been  an important instrument for refocusing the attention of the State  governments on the importance of urban infrastructure. In recognition  of the role of JNNURM, the allocation for this scheme is being stepped  up by 87 per cent to Rs.12,887 crore in the current budget. To improve  the lot of the urban poor, it is proposed to enhance the allocation for  housing and provision of basic amenities to urban poor to Rs.3,973  crore in the current year’s budget. This includes the provision for  Rajiv Awas Yojana (RAY), a new scheme announced in the address of the  President of India. This scheme, the parameters of which are being  worked out, is intended to make the country slum free in the five year  period.
                   
                    The Accelerated Power Development and Reform Programme (APDRP) is an  important scheme for reducing the gap between power demand and supply.   It is proposed to increase the allocation for this scheme to Rs.2,080  crore, a steep increase of 160 per cent above the allocation in the BE  of 2008-09.
                   
                    The  proposal that IIFCL will be given more flexibility and has been  authorized to raise Rs 100,000 crore in for the development of the  infrastructure sector can indirectly benefit the real estate industry  since quite a few infrastructure projects have a real estate component.  Therefore, boosting infrastructure projects gives an impetus to the  real estate sector too. The clearing of regulatory bottlenecks for  infrastructure projects will help bring forward many pending projects,  thereby boosting the construction sector. Further, allocation for the  NHAI has been increased and this will mean improved and accelerated  connectivity, raising the value of existing real estate along these  routes and also opening up new land parcels for development.
                   
                    Allocation  for JNNURM has been substantially increased and this can held in  improving road and rail connectivity in urban areas, thereby leading to  a boost in mass housing schemes on the fringes of the metros. To what  extent this will actually happen is yet to be seen. On the same lines,  increased allocations for Rural Electrification Scheme, the Rural  Housing Fund and Rural Road scheme may serve to improve the real estate  markets in far-flung areas and may also help to reduce inward migration  from the villages by providing industrial growth in the hinterlands.  This may herald the beginning of organized real estate in the  semi-urban and rural areas. Again, these are all long term, rather than  short term, perceived benefits of this budget.
                   
                    In  a specific context, the increase of funding for the Commonwealth Games  could vastly enhance development potential in the Delhi NCR region and  have direct positive implications for the hospitality  industry in this  sector.
                   
                    Manufacturers  of prefabricated concrete slabs will now have a tax relief and goods  made at construction sites now have their exemption reinstated.  This  is good for developers of lower income housing segment, who depend  largely on low cost construction.  This could give the much needed  impetus to prefabricated housing.
                   
                    The  increase in Income tax exemption limits is not sufficient to make a  significant difference in buyers’ purchasing power, but may serve as a  feel-good factor.
                   
                    The  budget has been silent on the tax implications of software parks  vis-à-vis the special economic zones and thereby, the real estate  developers are left rather high and dry on this account.
                   
                    On  the social housing sector, the new Rajiv Awaas Yojna may enhance the  prospects of urban slum dwellers of getting better quality housing.  This scheme under JNNURM is intended to promote support and property  rights to people living in slum areas. However, the extent to which the  benefits actually reach the target groups, as in all other government  schemes, is a matter to be closely watched.
                   
                    The  Budget did not mention FDI into the real estate sector or REITs and  REMFs. There has also been no light on increasing tax exemptions on  housing loans, principal repayment and interest.  No mention was made  on the undoing of service tax on rentals which were introduced in the  previous budget. This is not going to improve the status in terms of  commercial and retail leasing. There is a lack of measures in terms of  end user facilitation, boosting of  purchasers and the growth of   affordable housing.
                   
                    Looking at the above proposals as well as the lack of any clear  directed proposals in the personal taxation rates, but for a very small  benefit to individual direct tax payers, it is clear that the  government has focused more on the overall infrastructure sector  improvement.  It has not touched individuals and improving their  ability to invest in housing finance and real estate projects.  It has  also not provided for any incentives for the real estate developers or  the housing finance companies to create affordable housing for the  masses.
                   
                    Therefore, in this kind of a scenario, the possibility of the real  estate sector seeing good times in the near future appears to be  delayed.  The Government has really lost a very good opportunity of  using housing and real estate as the fuel to ignite the economy and  roll it back full steam.