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Budget 2010-11: Construction


India is on the verge of witnessing a sustained growth in infrastructure buildup. With a slew of announcements in housing, road, port and airport development, we are seemingly on a path of sustained recovery in infrastructure construction in the country. As infrastructure plays a vital role in the Indian economy, many experts believe that in order to go to a double digit growth path in the future, investments in the infrastructure sector should be increased. Given Rs 1,735 bn earmarked for the infrastructure development in FY 2011, we believe this a step in the right direction.

Income of the companies engaged in infrastructure development was exempt from tax under section 80-IA for 10 consecutive years which is about to expire in March 2010. Although non-extension of this tax holiday for another term proved to be a dampener, we are excited about the road map laid down for the sector as a whole from an economic standpoint.

 Budget Measures


  • Government earmarks Rs 1,735 bn for infrastructure development
  • Road development expenditure allocation increased to Rs 198 bn
  • Target to build 20 km of highway each day
  • IIFCL to double refinancing to banks lending to infrastructure companies
  • Approximately Rs 661 bn allocated for rural development
  • Interest rate subsidy for affordable housing extended till FY 2011
  • Developers allowed to complete housing projects in 5 years (extended by a year) to avail tax breaks
  • Additional tax relief of Rs 20,000 for investing in infrastructure bonds over and above the total investible limit of Rs 1 lac pa
  • Allocation towards development of urban infrastructure stands at Rs 35 bn

     Budget Impact


  • Increase in refinancing from IIFCL will encourage banks to lend to infrastructure companies boosting overall growth in the sector
  • Increased allocation towards road infrastructure development will better the existing transportation mechanism
  • Extension of interest rate subsidy will boost the demand for affordable housing
  • Providing additional tax relief for investment in infrastructure bonds will further encourage retail participation in the sector

     Company Impact


  • Extension of interest rate subsidy to benefit companies like Parsvnath and HDIL as they cater to low income housing group
  • IRB Infra and IVRCL Infra to be directly benefitted as a result of increasing thrust on road infrastructure development

    Budget Impact: Construction Sector Analysis for 2009  | Construction Sector Analysis for 2011
    Latest: Performance Of Construction Stocks | Construction Sector Report


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