The Centre is readying a package to help boost exports and perk up the real estate sector. According to senior government officials, the steps in real estate could include a task force to identify and revive stalled projects, easing of interest subvention norms, a new rental housing policy, an increase in the affordable housing category limit and reducing time taken to process applications under the partial guarantee scheme for housing. In addition, there could be specific measures to make export credit easily accessible to small exporters. Expediting work on the long-awaited goods and services tax (GST) e-wallet for exporters is yet another announcement expected soon.
While announcing the first set of measures last week, Finance Minister Nirmala Sitharaman had promised two more rounds to boost some of the stressed sectors, including real estate. Officials said a package aimed at home buyers and real estate developers could come by the end of this week.
The real estate industry, which has been in the doldrums for almost four years now, has been demanding regulatory and tax changes to shore up the demand and liquidity. Sitharaman, along with Urban Development Minister Hardeep Puri and senior officials, had met representatives of the housing industry recently to discuss the status of the sector.
“There have been discussions on a task force for real estate similar to the one for infrastructure projects announced last week. The finance minister spoke about promoting rental housing sector. A new policy is in the works,” said an official privy to discussions.
The role of the task force will be to identify stalled projects, assess how much money is needed, and how much could be recovered. It is unclear whether this will be a new panel or whether the inter-ministerial task force being formed by the Department of Economic Affairs to finalise the pipeline of infrastructure projects will undertake the real estate work as well.
In the July 5 Budget speech, Sitharaman had said: “It is proposed that several reform measures would be taken up to promote rental housing. Current rental laws are archaic as they do not address the relationship between the lessor and the lessee realistically and fairly. A Model Tenancy Law will also be finalised and circulated to the states.
Among other steps, a recent circular by the National Housing Board (NHB), prohibiting interest subvention for housing loans, is being looked at for a possible review. Officials said prohibition could be eased for the affordable housing category at least. Sitharaman could also announce an increase in the affordable housing category in metro cities, which stands at Rs 45 lakh currently. The industry wants the affordable housing cap to be raised to Rs 1 crore.
As for exports, while Commerce and Industry Minister Piyush Goyal has tackled the falling rates of export credit on a priority basis since taking charge, the export credit disbursal by public sector banks has fallen by 45 per cent in 2018-19 to Rs 156 billion, down from Rs 283 billion a year ago, according to data from the Reserve Bank of India.
In June, Goyal had stated that exporters should be able to take more and more export credit in foreign currency. Subsequently, the ministry now aims to raise the share of foreign currency in total export credit much beyond the present level of about 50 per cent. It has asked the RBI to consider whether its foreign exchange reserves can be used for providing a line of credit for swap to good banks for this purpose, a senior official said.
This will result in cheaper foreign currency loans, he added.
The ministry has also discussed in detail the possibility of easing norms for banks when it comes to lending export credit.
The cap on export credit for banks at 2 per cent of the total loans disbursed by banks may also be relaxed to boost export credit flows, the official pointed out.
Merchandise exports recovered a bit to post a growth of 2.2 per cent in July, compared to a huge contraction of 9.7 per cent in the previous month even as the outbound shipments of high foreign exchange earners such as refinery products, engineering goods and gems and jewellery fell.
When it comes to introduction of GST e-wallet for exporters, the measure was announced at the 22nd GST Council meet in October 2017, but it’s yet to become a reality. The FM is however expected to announce steps in a few days to expedite the move.