Bulk buyers will find steel and cement significantly cheaper now. This comes as good news for the construction sector

Some of the sops announced by the government, reduction in service tax, for example, promises to bring some cheer to the realty industry. There has been a cut in duty on bulk cement from 10 to eight percent. The excise duty on steel has been reduced. Also, there has been a cut in service tax rate from 12 to 10 percent in case of rent. This move, coupled with reduction in interest rates, will do the realty industry good.

The reduction in service tax will benefit those who are on rent in large commercial complexes. For example, a tenant paying Rs 10 lakhs as rent annually for an office space would have paid Rs 1.2 lakhs as service tax. Now he saves Rs 20,000 annually.

Excise duty cuts are usually passed on by companies in the form of price cuts or discounts. When the excise duty was cut last time, the steel companies passed on the benefits to their customers.

The sops will have a positive impact on people's sentiments. The duty cut can bring down the cost of construction by around 1.5 percent. This will make a significant difference to large projects.

The reduction in steel prices mean a reduction in the construction costs of a house, and lower input costs. Domestic steel makers have raised the production from the low levels of last quarter of 2008. The reduction in excise duty in the present economic condition will be beneficial. It will increase demand and give a boost to the economy. Steel companies will pass on the excise duty cut to customers.

A two percent cut is significant. After a continuous, steel is currently selling at Rs 26,500 a tonne. A two percent excise cut will mean that prices will fall by Rs 500-600, if companies pass on the full benefit.

The government's move to reduce excise duty on bulk cement from 10 to eight percent will result in a marginal drop of Rs 3-4 per 50 kg bag at the retail level. Prices for bulk buyers, like ready mix concrete (RMC) batching units, will drop significantly. The drop would be between Rs 60 and 70 a tonne for bulk buyers like construction companies and RMC units.

The reduction in excise duties on steel and cement is expected to boost the realty sector, at least to an extent. Both steel and cement constitute essential elements for construction of property. Moreover, as there has been a reduction in excise duty, there are all the more chances that the steel and cement manufacturers will pass these on to the consumers. The bulk buyers will gain in particular, because for them the savings would be enhanced because of volumes