construction 12 - copy (2)

8/2/2019 Construction 12 - Copy (2)

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-Ajay Sharma -Himanshu Singh

-Deepak Cyril -Sridhar Iruvanti

-Debayan Banerjee


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OVERVIEW Presently one of the most booming industries in the world

Categorized as Heavy Engineering, General

Construction and Construction involving Specialty Traits

Rapidly Growing in Asian Tiger countries i.e. India and China

In India Construction is the 2nd largest activity after Agriculture


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Construction accounts for nearly 65% of the investments

made in Infrastructure and Real Estate sector in India

239.68 Billion Euros are likely to be invested in construction

sector in coming 5-10 years

Real Estate and Construction industry received nearly

216.53 Million Euros in the first half of the current fiscal year


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INDUSTRY OUTLOOKConstruction Projects are subject to a host of Central and State

laws simultaneously

International Participation in Mega-Projects led to the infusion

of advanced technology in construction practices in India

Construction-industry growth rate is higher compared to the

overall growth rate in India

In the next 5years, an annual growth rate of 10% is expected in

commercial and industrial segment of this industry.


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Central Government is also planning to make massive

investments in physical and social infrastructure

Planning Commission also estimated an investment of about 320

billion US Dollars during the 11th Five Year Plan Period

Real Estate and Construction industry showed the highest growth

before we faced the economic slowdown

However recent global economic downturn, has brought huge

insecurity for those having large capital investments in this sector


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PROPERTY LAWS

Area of law dealing with ownership of personal and real propertyCivil Laws categorizes property as movable and immovable

property

Movable corresponds to personal property while immovable ones

are real property with associated rights and obligations thereon

LAWS RELATED TO IMMOVABLE PROPERTY

TRANSFER OF PROPERTY ACT, 1882

TP Act provides a mortgage by deposit of title deeds and withoutany requirement of registration


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No clear provision for machineries embedded in land as

immovable or movable property

Contains provisions relating to transfer of actionable claims

No clear provision for transfer of future receivables

REGISTRATION ACT

Contains provisions for the registration of transactions relating to

immovable properties

No provision for granting title certificates by the registration

authorities

Documents registered under this act are sale deeds ,mortgage

deeds and lease deeds


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THE INDIAN SUCCESION ACT

Under this act, a succession certificate is issued only for claims

pertaining to assets, debts and securities

No succession certificates are issued for assets that are in the

form of properties and valuables

THE INDIAN CONTRACT ACT, 1872

Contains provisions regarding possession of securities

Law relating to non-possessory securities is covered by the

general principles of the contract


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HOUSING DEMAND AND SUPPLYWas witnessing a super boom till the time of economic

slow down.

Present scenario is to sustain business. Recession hit IT professionals badly which affected the

investments in real estate.

Predictions by Indian express states that demand will

go high in 2012.According to reports its one of the most dynamic

sections.


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Housing industry again started growing at a goodpace.

Increase in number of real estate developers, rise indemand for properties, availability of financingoptions increased the demand.

These factors are also added on by governmentssupport.

These have added on by large population base, risingincome level and urbanization factors.


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Housing industry to overtake other industries in terms of

contribution to GDP.

However the reserve bank has influenced in such a way to

increase the housing loans by 15 20 percent.

This may affect the demand of housing in the future.

Its also predicted that India will have a total demand of 2.3

million of residential property in the next five years.


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Increase in demand of land in different

cities


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Housing policy reflects the political ideology of the government in power.

US HOUSING SCENARIOThe demand for new homes has been held below normal because of;

Job and income insecurity. Difficulty in getting a mortgage.

Anticipation of additional declines in prices.

House to sell (the seller needs to sell another home before buyinga new one)

Changing attitudes toward home-ownership and renting.

But there has been a small improvement witnessed this year.


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CHINESE HOUSING SCENARIO

Residential property prices are in freefall in China.

The countrys largest builders began discounting homes in Shanghai,

Beijing, and Shenzhen and has moved to outskirts. Even at the time of good sales construction industry was running out of

demand the main reasons are strict government measures, prohibitions onsecond home

Due to these reasons a campaign was conducted which provided mortgageof 30% and second home 60%.

There were special taxes from second home onwards.

ASIAN HOUSING SCENARIO

Was considerably good till the date of recession then had a declinephase. But compared with other Asian countries India and China didbetter.

It came back strongly towards the end of fourth quarter in 2010.

Even the luxury sector has been steady from the latter part of2010.

But some major markets lost out mainly because of the policies ofHongkong, China and Singapore.


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Change in the Construction Sector

over the Years


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The fundamental elements needed for the construction

Industry:Working Capital necessary for Bonding Purposes:

Equipment Needs

Cases when IRC Section 531 were relaxed:

Ready Paving and Construction Co.

Thompson Engineering Co

Peterson Bros. Steel Erection Co.


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ALTERNATIVE MINIMUM TAX

-Loan for New Construction1. Homebuilders: IRCSection 56(a) applies to long-term contracts except forhome construction contracts

2. Small Corporations: Exempt from AMT for tax years

beginning after 1998. Small corporations are Ccorporations with average annual gross receipts of$5,000,000 remain exempt in subsequent years untiltheir average annual gross receipts exceed $7,500,000.

EMPLOYMENT TAX


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First time home buyer loan

Housing Loans

RECENT HOUSING TRENDS

HUDCO-Entered into the retail housing finance withthe launch -Hudco Niwas Scheme

FINANCIAL ASSISTANCE


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HOUSING FINANCE

HDFC

HUDCOANZ Grind Bank, Standard Chartered and Citibank

BUILDERS LOANS


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PROBLEMS RELATED TO LAND ACQUISITION The biggest hurdle in the growth of Indian construction

industry story is land because it is a scarce resource.

Increased economic growth has increased the alternative uses

of land such as for industries, infrastructure projects.

In India the issue of land acquisition has become politically

sensitive.

The dislocation of farmers from their lands has led to

agitations and in some cases violence also.


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By bringing in development we are disturbing ecological

balance of tribal areas.

Plus the farmers dislocated from their land often dont get

adequate compensation.

But this has a downside to it the if state government asks

sellers to give higher compensation to farmers investors can

move to another state.

Another important problem is the rehabilitation and skill

development of the dislocated farmers.


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The land acquisition bill was enacted in 1894.

There have been many attempts to amend the landacquisition (amendment)Act 2007 but all wereunsuccessful due to political controversies.


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RECENT NOIDA EXTENSION LAND ISSUE The recent Noida extension land issue affected many

infrastructure projects.

More than 15 villages were affected by the Noida extension

dispute like Shahberi village, Bisrakh, Yusufpur etc.

Renowned real estate builders like Jaypee, Supertech were

alloted 4 lakh sq. mtrs.

of land by GNIDA at very low prices.

Farmers decided to protest against the govt. and moved to

court.


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As a result their compensation was increased.

Many flat owners withdrew the booking amounts, and various

other investors even cancelled their bookings.

The dispute badly affected the investors interests in the area.

To see that in future this problem does not occur in future

govt. should provide adequate compensation to the farmers.

Skill development and training should also be provided to the

farmers.

B d 2012 2013


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Budget 2012-2013Housing sector contributes about 5% of total GDP.

With institutional credit for housing investment growing at a

compounded annual growth rate of about 18-20 per cent per annum,

contribution to GDP is likely to increase to 6 per cent.

For every rupee that is invested in housing and construction, Rs 0.78

gets added to the GDP.

Permission for external commercial borrowings (ECBs) for low cost

affordable housing projects. (Players in this industry are not used to

taking the ECB route for affordable housing projects.)

Nothing done to give incentives to home buyers to encourage them

to purchase property so as to clear up the housing stock that has

piled up.


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Investment in infrastructure to go upto Rs. 50 lakh crore, more than half of

this expected from the private sector.( Delhi metro expansion bags 1112.57

crore of a total of 3164.57 crore and remaining to be pumped into

construction of metros across the country (Kolkata, Kochi, Chennai, Mumbai

and Jaipur).

More sectors added as eligible sectors for Viability Gap Funding under the

scheme Support to PPP in infrastructure

Target of covering a length of 8,800 kilometre under NHDP next year.

Tax free bonds worth Rs. 60,000 crore to be allowed for financing

infrastructure projects.


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ConclusionCut-throat competition- In India there are very few construction projects in the

pipeline and there are many companies bidding for a single project so the

competition is immense.

Corruption-The recent land, housing(Aadarsh housing scam), telecom scams etc.

has reduced the confidence of companies that wanted to invest in India.

Environmental clearances & sustainability- There are many environmental

checks that a company has to undergo before starting a project this involves

getting clearance from Ministry of Environment and Forests as well as separate

clearances from individual state ministries, too much time as well as resources

are consumed waiting for getting all environment clearances.

Land acquisition problems- Singur, Nandigram and the recent Noida case show

the current problems that are linked with land acquisition.

Time-The time that is required for project completion in India is long as

compared to other countries because there are issues related to land acquisition

and environmental clearances

Recommendations


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Recommendations

Review of present procedures of procurement of projects & services including

dispute resolution mechanisms, and quality issues and evolve measures forimprovement

The Contract Conditions being used by various Project Authorities in the Country,

whether in Public or Private Sector, should be harmonized.

A National Plan for training and certification of Construction personnel at all levels

should be developed and implemented.

Systems & Institutions should be developed for expansion of network for project

export and attracting more foreign investment. Interactions withIndian Missions

abroad , should be intensified, through evolution of an Institutional mechanism.

A mechanism for registration of professional engineers need to be established for

which a nodal agency need to be identified. Intake in academic institutions be

regulated to mitigate declining trend in the availability of civil engineers.

Institutional Arrangements be made to identify, prevent and mitigate the

effects of Natural Disasters.


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References

http://www.seminarprojects.com/Thread-indian-construction-

industry#ixzz1maAcYk9Q

http://www.constructionupdate.com

CII Website

Livemint.com

FICCI

http://mhupa.gov.in/