Economy: A Booster Shot?

The housing sector has finally received some good news, at least to homebuyers stuck in incomplete projects totalling 3.5 lakh units across India. It’s small but significant news indeed. The Centre, as demanded by the real estate industry associations, has created a special window to provide last-mile funding requirements for housing projects that have been under construction and remained unfinished till date. Also, these housing projects should be “non-NPA and non-NCLT” and should be networth positive in affordable and middle income category.

A corpus of Rs 10,000 crore will soon be created towards this by the government. “This is a major boost to the housing sector (affordable and mid segment) and a perfect festive treat for lakhs of homebuyers, who have been anxiously waiting for their prized possession,” said Anuj Puri, Chairman, ANAROCK Property Consultants -- a leading authority of the business of real estate in India.

Nimish Gupta, MD, South Asia, Royal Institution of Chartered Surveyors (RICS) termed the move as a “big impetus to the affordable housing projects”, at least those with positive networth. “The special Rs 10,000 crore window to extend funding to incomplete housing projects, especially within the low-and mid-income housing categories, will ensure that development and delivery come back on track,” added Gupta. RICS is a professional body promoting and enforcing the highest international standards in the valuation, management and development of land, real estate, construction and infrastructure.  

Challenges Galore
But there are several challenges along the way as the said corpus comes with its own set of strict riders. For example, this corpus cannot be used to help complete housing projects that are already declared as part of Non-Performing Assets (NPA) with banks. Also, this fund will be of no use for projects, where the matter is being argued before the National Company Law Tribunal (NCLT). A quasi-judicial body, NCLT, helps in settling disputes related to corporate cases, including corporate insolvency resolution process when a company defaults on making payment to creditors (here homebuyers). Therefore, it is clear that not all homebuyers waiting for their dream homes will be getting the relief. Also, the fund is for projects in the affordable and mid segment housing only, thereby excluding housing units that cost upwards of Rs 50 lakh.

“In the NCR, this will be a major problem, given that most of such projects are under NCLT and NPA, and will not get the benefit of this stress fund,” said Niranjan Hiranandani, President, National Real Estate Development Council, the apex body of real estate developers under the aegis of the Ministry of Housing And Urban Affairs. He was reacting to the announcement made by FM Nirmala Sitharaman on September 14, 2019. “This announcement will not solve the problem of delayed/stalled projects and affected home seekers in locations like the NCR,” he added.

Sitharaman also said that the National Investment and Infrastructure Fund and Life Insurance Corporation of India will invest in the new housing fund. Also three and half lakh schemes will be targeted for the special housing funding window. It also announced relaxing the External Commercial Borrowing guidelines to facilitate financing home buyers, who are eligible under the Pradhan Mantri Awas Yojana (PMAY). The industry hails it as a positive development. “The new ECB norms will also provide homebuyers under the PMAY access to financing in consultation with the RBI. Government employees will also be encouraged to buy/build new houses, with the interest rate on house building advance being lowered and linked to 10 year G-Sec yields,” added Gupta of RICS.

“She has made a beginning on both, the demand side as well as the liquidity side, which augurs well for Indian real estate, but it would be welcome if the proposal is further enhanced,” added Hiranandani. On a positive side, the corpus will be completely professionally-driven, including real estate experts, banking or housing finance specialists. “These specialists will need to identify such projects that are affordable and middle-income projects and are in need of last-mile funding for completion,” said Puri. That said, these funds are not enough to give relief to the sector as a whole. There are more than 5.5 lakh units that are stuck or delayed in top 7 cities alone, which would be much higher if we consider all cities and towns, he added.

Not everyone is happy with the announced measures. Satish Magar, President, CREDAI, the apex body of private developers terms the announcement as a “disappointment” not for the industry but for the lakhs of people employed within. “The need of the hour, and expectation of the home buyers and the developers was for the government to take bold decisions,” he added. Let’s hope the measures, at least, lead to creation of some positive sentiments.

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