Construction sector awaits liquidity booster

According to experts, the construction and infrastructure builders expect better days ahead, largely due to the latest Central Government's move to infuse liquidity into the sector. The Cabinet has recently approved the release of 75% of the arbitration award money to the contractor even for contracts that have been challenged in higher courts, they said, adding that this is a major step which will allow recovery of loans by banks and help construction companies to speed-up execution of ongoing projects and also to bid for new contracts. According to Vijay Goel of Karvy, the new arbitration measure would revive the construction sector in terms of addressing stressed loans and providing liquidity through releasing funds stuck in arbitration awards. This will eventually help in the revival of stalled projects as the release of payments would reduce debt and will be used for working capital requirements. Similarly, Systematix Research, the transfer of pending claims under the amended Arbitration Act can lower the claim settlement time (12-18 months) from an average seven years currently. Lauding the initiative, Edelweiss Securities said that, while exact timelines and modalities involved in the process are yet to be defined, the decision will significantly aid construction companies struggling with balance sheet woes by improving their profitability.