Will The Government’s Relief Package Boost India’s Troubled Realty?
When finance minister Nirmala Sitharaman announced a Rs 20,000-crore relief package last week, to rescue pending housing projects, she gave hope to lakhs of property buyers in the country that they will get delivery of their homes. The much-anticipated and widely-talked-about ‘stress fund’, however, might only be a partial relief at best.
At a time when nearly 8.5 lakh housing units have been stuck at various stages of construction across India’s prime property markets, a grant of at least Rs 200,000 crores was expected by the realty segment. The country’s stressed banking sector, which received a large relief package of Rs 70,000 crores from the government recently, has an exposure of over Rs 40,000 crore to housing projects where last-mile liquidity support could ensure delivery in a year. So, it’s only natural that builders are terming the Rs 20,000-crore relief ‘too little.’
What is the problem with the amount sanctioned in the relief package?
The amount alone is not the issue. The selection criterion makes many projects ineligible to avail of the benefits. Housing projects that don’t belong to the affordable or middle-income group category will not get any relief money, as the government has inserted a caveat to that effect in its terms and conditions. (Units priced below Rs 45 lakh are affordable homes. Also, there is no government recognised definition of middle-income group units, which has to be clarified before builders can start claiming the funds.)
Housing projects that are declared non-performing assets (NPAs) or caught in legal issues involving bankruptcy are also ineligible for relief. So, there is no respite for those buyers who have invested in housing projects of companies like Amrapali, Jaypee, Unitech, 3C Company, Parshwanath and HDIL.
The government itself estimates that only 3.5 lakh home buyers would benefit from the real estate relief package it announced on September 14, 2019. At a time when the growth in Asia’s third-biggest economy has plunged to a six-year low of five per cent and the government is trying to revive property demand amid a slowdown, its Rs 20,000-crore largesse to India’s biggest employment creator sector, may be too less.
Magnitude of the problems the real estate sector faces
According to data available with PropTiger.com, over eight lakh housing units have been lying unsold across nine major property markets of India and nearly a million fresh units are to join the market in a year and a half. The government expects to revive demand by lowering interest rates for government employees and relaxing external commercial borrowing norms (specific actions have yet to be detailed) for units sold under the Pradhan Mantri Awas Yojana (PMAY).
India’s realty sector continues to reel from the combined impact of demonetisation, which saw the government moving high-value currency notes out of circulation in 2016 and the July 2017 rollout of the goods and services tax (GST), which subsumed all indirect taxes. Despite plunging property prices and record low interest rates, there has hardly been any pick-up in demand. Even as buyers continue to prefer being fence-sitters, builders are facing the double whammy of liquidity starvation and increased compliance burden. They also have to worry about unsold stock and deal with taxation issues while they sit on a huge inventory. In what seems indicative of their plight, Indian builders’ annual payout towards loan repayment is twice as much as their annual earning. A slight demand pick-up is unlikely to address an issue that is taking on gigantic proportions.
- by Sunita Mishra
Source : PropTiger
Source : PropTiger
