A whopping 421 real estate companies in India are facing insolvency. About 45 % cases of litigation in consumer court are against builders. Well, the numbers are enough to gauge the sentiment of the real estate sector. No wonder that home buyers as well as the developers themselves are in a fix and are facing a dead end.
Buzz has it that union finance minister Nirmala Sitharaman is soon to propose some policy solutions to address the grievances of homebuyers. The industry stalwarts and leaders have already met the minister but so far, nothing has heard from North Block.
As per CNBC, the government proposal is doing to-and-fro from ministry to the drawing board who are collectively still trying to figure out measures to give relief to home buyers and developers. Finance ministry is still exploring if the booster dose fund should be under NIIF, NBCC or Urban development ministry and what should be the actual quantum of the fund. The amount that can be dispersed immediately to finish stuck projects is also being worked upon.
The news comes as a disappointment for the industry stakeholders who were expecting some big relief this week itself. But the fact that the ministry is not in a hurry and is considering all the proposals and is reworking the solutions and measures to bring relief to the sector does bring a sense of hope.
The prime offering that home buyers are expecting from the government’s relief measures is the grant of Rs. 10, 000 crore stress asset fund to finish the stalled projects in next five years. However, some industry experts believe that the amount won’t be enough as liquidity problem is much deeper with NBFCs staying away from real estate sector. To finish off about 4.5 lakh stuck units, the sector will need 1.5 lakh crore of liquidity, Pankaj Kumar from Eldeco told CNBC.
However, industry experts stand divided how much a stress asset fund can actually solve real estate sector’s problems.
Reforms in RERA has also been proposed by the industry leaders to bring more stability and address insolvency issues. Developers reportedly has emphasized again that the law wherein a single buyer can take the real estate company to insolvency should be reformed otherwise insolvency cases will definitely rise.
Case by case study is also being proposed wherein each and every stuck project should be studied individually. If a project is 50% or more sold, it can be completed using funds from private equity and last-mile funding from consumers.
Unless and until the stuck units are not pushed into completion, confidence of buyers are not going to restore.Â
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