Share |

How to Profit from Small Caps
Click here to know now!

Our all-new mutual fund
portfolio service!
Sign Up for Free Newsletters
Honest Truth by Ajit Dayal
Straight from the Hip by J Mulraj
BACK TO BUDGET HOMEPAGE

Budget 2008-09: Construction


India is on the verge of witnessing a sustained investment phase in infrastructure buildup. With a slew of announcements in housing, road, port and airport development, we are seemingly on a path of sustained higher economic growth on the back of improvement in infrastructure construction in the country. From a policy perspective, there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. A substantial chunk of the abovementioned investment target is likely to come from the private sector. Read more

 Budget Measures


  • The general CENVAT rate has been reduced to 14% from 16%.
  • Allocation for National Highway Development Programme (NHDP) has been enhanced to Rs 12,966 crore in 2008-09 from Rs 10,867 crore bn in 2007-08.
  • The budget has given special attention to development of roads in North Eastern region where 180 kms of roads will be completed in 2007-08 and 300 kms of road is being targetted for completion in 2008-09.
  • The corpus of Rural Infrastructure Development Fund (RIDF-XIV) has been raised to Rs14,000 crore, with a separate window for rural roads.
  • The budget has also given considerable thrust to irrigation project where the outlay for 2008-09 has been increased to Rs 20,000 crore from Rs 11,000 crore in 2007-08.
  • The government is setting up 14 irrigation projects with initial capital of Rs 100 crore to fund long-gestation major and medium irrigation projects.

     Budget Impact



  • The Bharat Nirman and water irrigation programmes will benefit companies involved in road construction and BOT irrigation projects.
  • Reduction of CENVAT is also a big positive for the sector as it indicates government's commitment towards the Goods and Service Tax Act.

     Company Impact


  • Companies like Jain Irrigation and Madhucon Projects will benefit from increased outlay in irrigation spending.
  • HCC and Gammon India likely to benefit from the highway development projects

     Industry Wishlist


    Builders' Association of India
  • Alter existing customs duty structure on imported steel bars and rods – fix the duty at 5% without levy of special additional duty and countervailing duty
  • Extend existing structure of import duty, countervailing duty and special duty on cement for another year, to discourage domestic manufacturers from hiking prices
  • Project exporters who have executed projects abroad to be allowed to import equipment purchased abroad at 5% duty instead of current 50%
  • Scrap 2% TDS on construction companies as margins are wafer thin at 4-5%. Allow companies to pay advance tax instead

     Budget over the years


    Budget 2005-06 Budget 2006-07 Budget 2007-08

    Grant of Rs 14 bn for the National Highway Development Programme (NHDP) III towards developing four-lane road of 4,000 kms.

    Rs. 4.5 bn allocated for the development of roads in the North-Eastern region.

    Establishment of SPV to finance infrastructure projects in specified sectors.

    Provision of Rs 15 bn for 'viability gap' funding for infrastructure projects.

    Outlay of Rs 55 bn for the National Urban Renewal Mission, including a grant component of Rs 16.5 bn.

    Increase in allocations for National Highway Development Programme (NHDP) from Rs 93.2 bn in FY06 to Rs 99.5 bn in FY07.

    54% hike in the budgetary support to the Bharat Nirman Programme, amounting to Rs 187 bn.

    Increase in corpus of the Rural Infrastructure Development Fund to Rs 100 bn.

    Grant of Rs 46 bn for the National Urban Renewal Mission.

    Exemption under Section 10 (23G) of the Income Tax Act removed. The section exempted income by way of dividend, interest and long-term capital gains arising out of investments made in an enterprise engaged in the business of developing, maintaining and operating an infrastructure facility.

    Plan allocation for Department of Shipping increased by 37% to Rs 7.4 bn to facilitate investment in National Maritime Development Programme (NMDP).

    Allocation towards Bharat Nirman increased by 32% to Rs 246 bn

    Increase in provision for National Highway Development Programme (NHDP) by 7.2% to Rs 107 bn

    Enhanced allocation for Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to Rs 499 bn, an increase of 9%

    Corpus of Rural Infrastructure Development Fund–XIII (RIDF) for FY08 raised to Rs 120 bn

    Separate window for rural roads under RIDF-XIII to be continued in FY08 with a corpus of Rs 40 bn

    Utilisation of foreign reserves towards infrastructure development

    Tax on dividend distributed by companies to be hiked from 12.5% to 15%

    Additional education cess of 1% to fund secondary and higher education

    [Read more on Budget 2007-08]


    Key Positives
  • Government spending on infrastructure: Government spending on infrastructure is the most important demand driver for the construction industry. Since adequate infrastructure is essential for sustained economic growth, construction activities have gained significant importance over the past few years. Though infrastructure development will be across sectors, the key drivers would be roads, water supply & sanitation and irrigation. Infrastructure construction investments, with a share of 25% in total construction investments are expected to grow at a CAGR of 9% over the next three years (Source: CRIS INFAC).

  • Growth in real estate construction: Real estate investments account for about 60% of the total construction investments. Demand-supply gap for residential housing, favourable demographics, rising affordability levels, availability of financing options as well as fiscal benefits available on availing of home loan are the key drivers supporting the demand for residential construction. In addition to this, demand for office space from IT/BPO segment is expected to continue due to emergence of India as a preferred outsourcing destination. Also, boom in organized retail is expected to result in huge demand for real estate construction.

  • Industrial construction to witness strong growth: With India Inc. on major expansion drive, the demand for industrial construction is expected to remain strong over the next few years. According to CRIS INFAC, industrial construction (accounts for 10% of the total construction investments) is expected to grow at a CAGR of 33%, mainly propelled by the investments in oil & gas and metals.

      
    Key Negatives
  • Execution risks: Increased investments in infrastructure and huge capacity addition plans by manufacturing companies have resulted in huge order books for construction companies. We believe that the people problem faced by the construction industry will make it difficult for them to execute large projects on a timely basis.

  • Payment issues: Construction companies involved in infrastructure development activities have to rely on government agencies for payments in case of cash contracts and annuity based projects. Delay in payments for projects can have adverse impact on profitability of companies.


    Budget Impact: Construction Sector Analysis for 2007-08 | Construction Sector Analysis for 2009
    Latest: Performance Of Construction Stocks | Construction Sector Report

     Feedback


    Name
    E-mail
    Your comments

     

    Sector Performance
    COMPANY PRICE (Rs)
    ABHINAV CAP 167.2
    (-5.0%)
    ADHBHUT INFRA 30.8
    (-1.9%)
    AGI INFRA 904.5
    (1.0%)
    AHLUWALIA CONTRACTS 1,020.0
    (0.1%)
    AJMERA REALTY 724.8
    (0.1%)
    AJR INFRA & TOLLING 0.7
    (3.0%)
    ALPINE HSG. 149.6
    (0.7%)
    ANSAL BUILD. 145.0
    (-0.5%)
    ANSAL HOUSING 13.3
    (-2.0%)
    ANSAL PROPERTIES 9.0
    (-5.0%)
    ARIHANT SUPER 328.8
    (0.8%)
    ARSS INFRASTRUCTURE 18.0
    (-0.2%)
    ARVIND SMARTSPACES 697.1
    (-0.1%)
    ASHIANA HOUSING 274.7
    (0.1%)
    ASHOKA BUILDCON 156.7
    (-1.8%)
    ATHENA CONST. 12.4
    (-5.0%)
    ATLANTA 22.6
    (-1.1%)
    BCPL RAILWAY INFRASTRUCTURE 94.7
    (-0.7%)
    BHAGYANAGAR PROPERTIES 42.0
    (0.0%)
    BHANDERI INFRA 114.0
    (-5.0%)
    BIGBLOC CONSTRUCTION 200.6
    (1.7%)
    BL KASHYAP & SONS 68.6
    (0.9%)
    BRIGADE ENTERPRISES 935.7
    (1.3%)
    BRIGHT REAL ESTATE 161.0
    (-0.6%)
    BSEL INFRASTRUCTURE 9.6
    (0.1%)
    CAPACITE INFRAPROJECTS 262.1
    (-2.5%)
    CEETA INDUST. 32.4
    (-4.9%)
    CHAVDA INFRA LTD. 101.2
    (0.7%)
    CITADEL REALTY AND DEVELOPERS 27.6
    (3.1%)
    CONSOLIDATED CONST. 1.5
    (4.9%)
    CONTINENTAL CONTROL 10.5
    (1.9%)
    COROMANDEL ENG. 55.0
    (5.0%)
    COUNTRY CONDOS 4.7
    (-1.7%)
    CRANE INFRA. 20.3
    (2.6%)
    DB REALTY 196.7
    (-1.3%)
    DECOROUS INVESTMENT & TRADING CO LTD. 11.0
    (14.6%)
    DEVOTED CONSTRUCTION 4.3
    (-4.9%)
    DHANUKA REALTY 26.4
    (-4.9%)
    DHRUV ESTATES 11.8
    (-5.0%)
    DILIP BUILDCON 456.9
    (7.5%)
    DIVYASHAKTI GRAN 75.2
    (1.6%)
    DLF 898.3
    (2.0%)
    EAST BUILDTECH 25.2
    (4.8%)
    ELDECO HOUS. 797.0
    (0.6%)
    EMAMI REALTY 104.9
    (-2.2%)
    ETT. 18.2
    (1.3%)
    GALLOPS ENTERPRISE 25.3
    (2.9%)
    GENERIC ENGINEERING 37.6
    (-3.1%)
    GODREJ PROPERTIES 2,299.1
    (1.0%)
    GPT INFRA 154.6
    (1.1%)
    GROVY INDIA 116.4
    (0.0%)
    GTL INFRA 1.6
    (0.6%)
    GUJARAT PIPAVAV PORT 212.6
    (-2.2%)
    GYAN DEVELOPERS 27.1
    (-2.0%)
    HCC 31.6
    (0.1%)
    HDIL 4.6
    (-5.0%)
    HEC INFRA PROJECTS 67.1
    (-3.2%)
    HEMISPHERE PROPERTIES 199.8
    (-0.2%)
    HILIKS TECH 27.1
    (-2.0%)
    HOMESFY REALTY LTD. 450.0
    (2.3%)
    HUBTOWN 131.6
    (-2.4%)
    IL&FS ENGINEERING 32.8
    (5.0%)
    INANI MARBLE 21.3
    (-0.1%)
    INDIABULLS REAL EST 116.0
    (1.2%)
    INTERNATIONAL CONSTRUCTIONS 89.1
    (4.9%)
    IRB INFRA 58.5
    (-0.7%)
    IRB INVIT FUND 66.9
    (-0.1%)
    ISHAAN INFRASTRUCTURES AND SHELTERS 4.8
    (1.3%)
    ITD CEMENTATION INDIA 334.2
    (1.2%)
    J KUMAR INFRA 631.3
    (-2.0%)
    JAIPRAKASH ASSO 17.9
    (-2.4%)
    JOY REALTY 45.3
    (0.0%)
    JTL INFRA 183.9
    (-3.5%)
    JUPITER WAGONS 373.4
    (1.0%)
    KAMANWALA IN 17.1
    (-1.0%)
    KARDA CONSTRUCTIONS 1.8
    (-1.1%)
    KAUSHALYA INFR. DEV. 592.5
    (-0.5%)
    KCL INFRA PROJECTS 1.7
    (-2.8%)
    KESAR INDIA 501.5
    (5.1%)
    KEYSTONE REALTORS 604.6
    (-1.8%)
    KINGS INFRA 182.4
    (-1.0%)
    KMF BUILDERS 6.8
    (-4.6%)
    KNR CONSTRUCTIONS 246.2
    (-0.6%)
    KOLTE PATIL 462.0
    (-0.7%)
    KRETTO SYSCON 0.8
    (-3.6%)
    LANCOR HOLDINGS 50.0
    (0.6%)
    LANDMARK PROPERTY 8.0
    (0.9%)
    MACROTECH DEVELOPERS 1,133.8
    (-1.6%)
    MADHAV INFRA PROJECTS 10.6
    (-1.9%)
    MADHAV MARBLE 38.6
    (0.4%)
    MADHUCON PROJECTS 9.2
    (4.9%)
    MAHESH DEVELOPERS 7.4
    (-5.0%)
    MAHINDRA LIFESPACE 586.3
    (3.8%)
    MAN INFRACONST. 204.3
    (-3.2%)
    MANAS PROPERTIES 390.0
    (0.4%)
    MANAV INFRA PROJECTS 22.5
    (0.0%)
    MANJEERA CONSTRUCTIONS 48.0
    (4.3%)
    MARATHON NEXTGEN 511.3
    (3.6%)
    MAX ESTATES LTD. 274.7
    (0.3%)
    MAXHEIGHTS INFRA 59.8
    (-1.1%)
    MBL INFRASTRUCTURES 54.2
    (-4.9%)
    MCON RASAYAN 115.9
    (-3.4%)
    MEGA NIRMAN AND INDUSTRIES 17.8
    (2.0%)
    MODIS NAVNIRMAN LTD. 249.5
    (3.7%)
    MURAD PROPERTIES & PROJECTS 5.4
    (-1.8%)
    NATIONAL STANDARD (INDIA) 4,847.4
    (2.9%)
    NBCC (INDIA) 119.1
    (4.9%)
    NCC 232.4
    (-3.5%)
    NESCO 829.4
    (-0.9%)
    NIDHI GRANITES 218.6
    (-2.0%)
    NILA INFRA. 10.4
    (-2.1%)
    NILA SPACES 5.4
    (-1.5%)
    NIRAJ CEMENT 37.1
    (-0.1%)
    NITESH ESTATES 2.9
    (-1.0%)
    NOIDA TOLL BRIDGE 7.4
    (-4.9%)
    OBEROI REALTY 1,473.7
    (-2.7%)
    OMAXE 90.7
    (10.0%)
    ORIENTAL TRIMEX 8.3
    (-2.2%)
    PACIFIC IND. 176.3
    (1.1%)
    PARSVNATH DEV 15.0
    (-0.5%)
    PATEL ENGINEERING 57.0
    (-0.6%)
    PENINSULA LAND 46.5
    (-1.3%)
    PG INDUSTRY 15.6
    (-5.2%)
    PHOENIX MILL 2,770.8
    (1.7%)
    PRAJAY ENGINEERING 23.9
    (0.2%)
    PRESTIGE ESTATES 1,170.0
    (-1.7%)
    PROZONE INTU 27.7
    (-2.0%)
    PSP PROJECTS 686.1
    (1.9%)
    PURAVANKARA 209.7
    (-2.6%)
    PUROHIT CONST. 13.0
    (-3.8%)
    PVP VENTURES 38.0
    (-4.9%)
    PVV INFRA 23.1
    (-5.0%)
    R.P.P. INFRA PROJECTS LTD. - (RIGHTS ENTITLEMENTS 27.6
    (-0.2%)
    RADHE DEVELOPERS 3.2
    (-3.7%)
    RAMKY INFRASTRUCTURE 486.1
    (9.4%)
    RAVINDER HEIGHTS 40.5
    (-1.3%)
    RAW EDGE INDUSTRIAL SOLUTIONS 30.2
    (-8.1%)
    RDB REALTY & INFRA 116.7
    (-2.0%)
    REL.INDUS.INFRAS 1,275.8
    (0.4%)
    RPP INFRA PROJECTS 108.4
    (0.4%)
    SAB INDUSTRIES 195.0
    (-4.7%)
    SADBHAV INFRA. PROJECT 6.9
    (1.9%)
    SAMOR REALITY LTD. 128.0
    (2.6%)
    SANATHNAGAR ENTERPRISES 18.9
    (2.1%)
    SBL INFRATECH 29.7
    (4.1%)
    SHANKARA BUILDING PRODUCTS 641.2
    (0.7%)
    SHANTIDOOT INFRA 81.2
    (4.9%)
    SHASHIJIT INFRAPROJECTS 6.1
    (0.5%)
    SHRADHA INFRA 66.0
    (7.1%)
    SHRIRAM PROPERTIES 113.1
    (-1.4%)
    SIGNATUREGLOBAL 1,359.3
    (2.8%)
    SIMPLEX INFRA 102.5
    (4.9%)
    SIMPLEX REALTY 127.7
    (0.1%)
    SKIL INFRASTRUCTURE 7.7
    (-4.9%)
    SOBHA 1,444.3
    (1.1%)
    SPML INFRA 129.2
    (-4.6%)
    SSPDL 14.9
    (0.1%)
    SUNTECK REALTY 389.2
    (-1.6%)
    SURAJ ESTATE DEVELOPERS LTD. 261.0
    (-1.2%)
    SURATWWALA BUSINESS GROUP 871.0
    (0.7%)
    SVS VENTURES 7.9
    (-3.7%)
    TANTIA CONSTRUCTIONS 34.3
    (2.0%)
    TARC 139.9
    (-0.8%)
    TCI DEVELOPERS 386.2
    (-2.0%)
    THAKKARS DEV 157.1
    (0.1%)
    TIRUPATI SARJAN 12.3
    (-4.3%)
    UDAYSHIVAKUMAR INFRA 48.3
    (0.3%)
    UNISHIRE URBAN 1.9
    (-4.6%)
    UNITECH 11.2
    (5.0%)
    UNIVASTU INDIA 139.0
    (-2.1%)
    VEER GLOBAL INFRA 154.0
    (0.0%)
    VICTORIA MILLS 4,100.0
    (0.0%)
    VIPUL. 26.9
    (-3.0%)
    VISHNU PRAKASH 149.9
    (-0.7%)
    VISHNUSURYA PROJECTS AND INFRA LTD. 219.9
    (-3.9%)
    VIVIANA POWER TECH 280.0
    (-1.8%)
    VR INFRASPACE LTD. 0.0
    (0.0%)
    WELLESLEY CORP 169.9
    (-2.0%)
    WELSPUN ENTERPRISES 305.0
    (-1.4%)
    YURANUS INFRA 74.7
    (-2.0%)
    ZODIAC VENTURES 13.8
    (-2.0%)

    © Equitymaster Agora Research Private Limited.
    www.personalfn.com | www.equitymaster.com
    Why Personalfn | Why Equitymaster | Terms of Use | Contact Us | About Us