The new urban development mission plans to develop 500 cities including cities with population of more than one lakh and some cities of religious and tourist importance.
The construction industry is the biggest sector of the industrial spectrum in India, going by sheer numbers. One trillion United States Dollar (USD) of investment is projected for infrastructure sector in India till 2017 and 45 per cent of it accounts for construction industry, while 25 per cent accounts for modernisation of the existing construction industry. Construction activity contributes as much as ten per cent to India's Gross Domestic Product (GDP). As per midterm appraisal in 2012, the urban share of India's GDP was 62 to 63 per cent in 2009-10. This is further projected to increase to 70 to 75 per cent in 2030. These statistical figures underline the importance of construction industry in India’s economic development.
Under Prime Minister’s Make in India programme, the construction industry has been appropriately identified as a sector. But the parameters of growth and development of this sector and the factors that impinge upon it are not simple. They are complex and complicated. In fact, they have been allowed to become complicated by the poor and inept regulation of this sector by the governments of the day. Let us consider the under mentioned stark facts of this industry.
The construction industry is dominated by limited numbers of private sector contractors working at large scale, many operating at medium scale and a huge number of contractors working at small scale. The construction industry is neither well organised nor properly regulated. Unscrupulous contractors fleecing and defrauding the customers are a legion. Corruption and lack of transparency have been, more or less, synonymous with this industry over a long period of time. In a regime where law and order enforcement machinery has been inept and legal institutional framework inadequate, the consumers served by the construction industry have been, largely at the receiving end. Lack of a regulatory mechanism has ensured price and quality disadvantage to the hapless customers. The accounts of buildings and bridges collapsing because of inadequate design still haunt public memory in this country. The years from 2004 to 2014 under the United Progressive Alliance (UPA) Government had seen tonnes of illegal and unaccounted money invested in the real estate sector, thus pushing real estate prices all over the country beyond the roof. A badly needed regulatory mechanism to enforce standards of quality and fair prices did not come into existence. So what is to be done in the present circumstances?
As indicated above, the first and the foremost requirement is the creation of an effective regulatory body to regulate price, quality and delivery and create healthy competition among Engineering, Procurement and Construction (EPC) contractors in the construction sector. It should have strong teeth to penalise defaulters who dupe customers with false promises in the realty sector. The present government should immediately establish such a body. With India's resources including abundant raw materials and cheap skilled labour, we should be setting global standards in quality and workmanship. But alas, we are far away from it.
The new urban development mission plans to develop 500 cities including cities with population more than 1 lakh and some cities of religious and tourist importance. 100 per cent Foreign Direct Investment (FDI) through automatic route is permitted in townships, housing, built up infrastructure and development projects. 100 per cent FDI is also allowed under the automatic route for Industrial Parks. The Union Budget of 2014-15 has announced a project to develop 100 smart cities as satellite towns of larger cities by modernising the existing mid sized cities in the country. A host of tax and other fiscal incentives have also been announced for developing Special Economic Zones (SEZs), Electronics Manufacturing Clusters (EMCs) and other sectoral clusters.
All the plans and measures as aforesaid are laudable. But real estate sector can flourish only when people are professionally well settled with good spending power. Other infrastructure including SEZs and Industrial Parks will see the light of the day only through initial initiatives of the government through its own spending. Governmental efforts to bring in private domestic and foreign capital may bear fruits gradually. This has been shown by the fiasco of the SEZ construction scheme launched by the UPA government.
(The writer is a senior columnist)