As was being anticipated since a past couple of weeks, Finance Minister Nirmala Sitharaman announced relief measures in reference to exports and home buyers. For real estate industry, government has announced a stress fund of Rs 20,000 crore for completion of stalled projects.
As per the announcements made on Sept.14, Saturday, a special window will be provided for last mile funding for stalled housing projects in affordable and mid-income category. The core objective of the funding boost will be completion of construction of unfinished housing units.
The government will contribute Rs. 10, 000 crore while the other Rs. 10,000 crore will come from investors like LIC and other institutions and banks. The fund shall be set up as Category-II AIF trust fund and will be run professionally by housing and banking experts.
The government claims that the funding boost will revive the ailing real estate sector. However, the realty experts plead to disagree. Here is why real estate leaders and experts are not very happy with government’s funding boost:
- A large section of buyers and stressed projects in the premium and worst impacted property markets such Mumbai and National Capital Region (NCR) will be left in the cold and will be benefitted by the funding boost.
- The measures say that the funding will be aimed to boost the projects that are non-NPA and non-NCLPT. On the contrary, the truth remains that several delayed and stalled projects in National Capital Region (NCR), the worst impacted property market, are under NCLT and NPA and will in turn not get the benefit of this stressed fund.
- The measures announced are aimed to revive affordable and mid-housing projects. However, affordable housing are the bestselling projects in a weak market and the limit defined by the government (under Rs. 45 lakh) severely restricts the eligibility of housing projects in Mumbai, NCR and Chennai. On the other hand, there is no fixed definition of mid-income house price range.
- The industry leaders and experts have constantly been demanding the stress fund of Rs. 2 lakh crore. Amount announced is, clearly, too less.
“We estimated about ₹2 lakh crore is the need of the hour to take care of all such stuck projects,” Livemint quoted Ghulam Zia, executive director at property consultancy Knight Frank India. “Even if you take away the ones which are NPA and in NCLTs, ₹20,000 crore is a bit short.”
Overall, the real estate industry was expecting something game changing from the finance minister and is reportedly disappointed with the measures. CREDAI (real estate association of 12000 industry veterans and leaders) has termed the government announcement as “half-hearted attempt” to revive the ailing sector.
More on real estate trends here.