Realty sector welcomes stimulus for stalled projects but says more needed to boost demand

New Delhi: The government's decision to set up a Rs 20,000 crore stressed assets fund for those residential projects that are non-NPA and not under NCLT will provide relief to lakhs of homebuyers, but it should have done more to boost housing demand, property developers and consultants said on Saturday.

They ruled that the government has not adequately addressed the issue of demand slowdown and lower sales. Builders were also hoping for an increase in the price cap of affordable housing to beyond Rs 45 lakh. To provide relief to aggrieved homebuyers, the government will set up a special window to provide last mile funding for housing projects which are non-NPA and non-NCLT in the affordable and middle-income category. In the fund, Rs 10,000 crore will be contributed by the central government and roughly the same amount will come from outside investors.

"The government has just scratched the tip of the surface with the recent announcement. They are not realising the gravity of the situation. Real estate industry is the second largest contributor to our GDP and creates millions of employment opportunities. Hence, we expect much more support," CREDAI Chairman Jaxay Shah said. "We all our working towards realising Prime Minster's dream for housing for all by 2022 but it is becoming challenging if the requisite policy reforms will not be announced," he added. NAREDCO President Niranjan Hiranandani said the announcement of Rs 20,000 crore fund is a welcome step as it will ensure completion of many affordable and MIG projects stuck because of last-mile funding requirements.

On the rider that this fund will cater to only non-NCLT and non-NPA projects, he said this announcement will not solve the problem of delayed/ stalled projects and affected home seekers in locations like Delhi-NCR. Anarock Chairman Anuj Puri said the stressed asset fund is a "major boost to the housing sector (affordable and mid-segment) and a perfect festive treat for lakhs of homebuyers who have been anxiously waiting for their prized possession." However, he added that since the fund does not include projects that are under NPAs and NCLT, there is a possibility that not all homebuyers will get the said relief.

Also, the fund is for projects in the affordable and mid segment and to this effect homebuyers within the luxury segment may have to wait even further. Puri said the government's move to relax external commercial borrowing (ECB) norms for affordable housing is another welcome step. Dhruv Agarwala, Group CEO of PropTiger and Housing.com, said the stress fund "could well be the lifeline the real estate sector, grappling with a slowdown, needs." These measures, along with the ones announced earlier, will provide a real and tangible solution to the major problems being faced by the real estate sector, which are stalled projects, funding crunch faced by developers and homebuyer stress.

Knight Frank India CMD Shishir Baijal said the government's steps are in the right direction and are poised to address some of the many challenges faced by the real estate sector. "While we welcome these changes, we feel these do not sufficiently address the issues of the sector in terms of continued slow sales and low demand," he added. The stressed assets fund would ensure that 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. Omaxe CEO Mohit Goel said the measures will play a pivotal role in enhancing the confidence of homebuyers in the real estate sector.

Grant Thornton Associate Partner Alok Saraf said the ECB relaxation will definitely enable developers to attract foreign debt investors with low cost of capital. "The set-up of realty fund of Rs 10,000 crore is too low considering the sector is clearly liquidity starved. The government also has to come out with more concrete steps on demand creation as the inventory holding has increased significantly across all key micro markets," Saraf said. Gagan Randev, National Director (Capital Markets and Investment Services), Colliers International India, said: "This is a positive initiative as this is the biggest issue facing the industry today. Countless projects, which otherwise have surpluses, are stuck for want of as (in some case) as little as Rs 10-15 crore because of lack of last mile funding.

If this can be implemented quickly, this would be a major boost to all such projects. The key is implementation." "With this support from the government the market will become more potent and many buyers will get the possession of their homes soon. Additionally, many unsold units of these stuck projects will come in the market opening up options galore for the property seekers.," said Dhiraj Jain, Director, Mahagun Group. Investor Clinic Founder Honeyy Katyal said the distribution of funds should be on an impartial basis and strict monitoring process should follow for these projects.