Most experts have given a thumbs-up to the measures announced by Finance Minister Nirmala Sitharaman for the housing sector, but caution that the proposals do not adequately address issues of the sector in terms of continued slow sales and low demand.
On Saturday, Finance Minister Sitharaman announced a special provision of Rs 10,000 crore as a last-mile funding for completion of ongoing housing projects that are not classified as non-performing assets (NPAs) or are facing bankruptcy proceedings under NCLT.
As per the proposal, the government will contribute Rs 10,000 crore for the special window and nearly the same amount is expected from outside investors. This window, the government believes, will help in completion of affordable and middle income housing projects.
“The attempt to provide for stressed assets with a special window for non–NCLT and non-NPA assets is important to ensure at least the healthy projects are not pushed into bad debt-like situation for want of working capital and that buyers get the home they have invested in. However, the larger issues of demand creation have not been addressed in any way. We await the results of the measures and targeted relief announced other sectors such as auto, manufacturing etc. to see how the economy is revived, leading to stability and growth in demand,” says Shishir Baijal, chairman and managing director at Knight Frank India.
Besides this special window, interest rate on housing building advance is proposed to be lowered and linked to the 10-year G-sec yields. External commercial borrowing (ECB) guidelines will also be relaxed to help housing developers obtain overseas funds.
Anuj Puri, chairman at ANAROCK Property Consultants also echoes a similar view and says the funds are not enough to give relief to the real estate sector as a whole. Moreover, the special window does not include projects that are under NPAs and NCLT. As a result, all homebuyers may not get the said relief. However, the special window of funds will give developers an opportunity to complete their stalled projects, which were in dire need of capital.
“The fund is for projects in the affordable and mid segment housing only and to this effect homebuyers within the luxury segment may have to wait even further. Also, there is no clarity of the price of mid-segment homes that will be included in this move,” Puri says.
According to reports, there are over 5.5 lakh units that are stuck or delayed in the top seven cities in the country alone. The pan-India figure would be much higher if all cities and towns are considered.
The unsold inventory with developers, however, dipped in the first half (January – June) of calendar year 2019 – a sign that the comatose realty sector may finally be coming to life.
According to a July 2019 Knight Frank report, the unsold inventory across top eight markets (Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad, Pune and Ahmedabad) saw a dip of 9 per cent year-on-year during the period under review at 450,263 units. While Hyderabad saw a decline of 67 per cent in unsold inventory at 4,265 units, Mumbai was the only market to record an increase in inventory with the overhang rising by 14 per cent to 85,387 units, the report said.