For delayed and stalled projects this will be a major problem, given that most of such projects are under NCLT and NPA, and will not get the benefit of this stress fund
The government’s announcement that a Rs 10,000 crore special window to provide last-mile funding for completion of around 3.5 lakh stuck housing projects which are not NPAs or facing bankruptcy proceedings under NCLT may ensure that at least healthy projects are not pushed into a bad debt like situation for want of working capital but it is unlikely to help resolve problems being faced by homebuyers stuck in projects such as Jaypee or Amrapali, realty experts said.
“The government has concentrated on projects which are not subjudice. Prima facie it seems that all the projects which are before courts, such as Jaypee, Unitech or Amrapali will be out of this,” said Kumar Mihir, advocate representing Amrapali homebuyers.
“The FM’s announcement is a setback to scores of homebuyers stuck in various projects in Delhi NCR. The funding and the central government's help was essentially needed for projects stuck before NCLT or which have been declared NPA so that hopes of lakhs of people could be revived. Homebuyers in any case have to go through the rigours of otherwise long drawn legal process, such statements will definitely dampen their spirits,” said advocate Ashwarya Sinha. Lead petitioner of the Jaypee Infratech case Chitra Sharma filed the petition through Sinha.
Even the realtors agree. Niranjan Hiranandani, president, NAREDCO, says that the FM has made it clear that the last mile funding is not for projects which are already under NCLT and are a NPA, given that delayed projects in both these categories are already undergoing due process under the existing set-up.
“For delayed and stalled projects - for example in the NCR - this will be a major problem, given that most of such projects are under NCLT and NPA, and will not get the benefit of this stress fund. This announcement will not solve the problem of delayed/ stalled projects and affected home seekers in locations like the NCR,” he says.
Anuj Puri, chairman – ANAROCK Property Consultants, says that since the FM’s announcement doesn’t include projects that are under NPAs and NCLT, there is a possibility that not all homebuyers will get the said relief.
These funds are not enough to give relief to the real estate sector as a whole. There are more than 5.5 lakh units that are stuck or delayed in top 7 cities alone which would be much higher if we consider all cities and towns.
Also, 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, he says.
Nevertheless, this special window of funds will give many developers an opportunity to complete their stalled projects which were in dire need of capital and thus provide relief to lakhs of homebuyers across the country, he says.
Also, the fact that the corpus will be completely professionally-driven including real estate experts, banking or housing finance specialists, it is likely to move more smoothly and in the right direction with little scope for misadventure. These specialists will need to identify such projects that are affordable and middle-income projects and are in need of last-mile funding for completion, he said.
“With this, the Government has made its intention clear that it wants to resolve the issues of real estate projects delayed for years. It is also a welcome announcement that the fund will be managed by professionals and hence the chances of funds again going into wrong hands will be eliminated,” said Abhay Upadhyay, president, member Forum for Peoples’ Collective Efforts (FPCE).
“However, we are hopeful that the government would expand the ambit and bring in also those projects which are less than 60 percent complete or which have become NPAs,” he said.
This window will help in completion of affordable and middle income housing projects. The fund will be managed by professionals, Sitharaman said.
She also said the interest rate on housing building advance will be lowered and linked to the 10-year G-sec yields. "Government servants contribute to a major component of demand for houses. This will encourage more government servants to buy new houses," she said.
External commercial borrowing (ECB) guidelines will also be relaxed to help housing developers obtain overseas funds. ECB guidelines will be relaxed to facilitate financing of homebuyers who are eligible under Pradhan Mantri Awas Yojna, in consultation with the central bank.
The government’s move to relax commercial borrowing for affordable housing is another welcome step, said real estate experts.
“We believe that any announcement is a sign that that the government is focussing on the challenges of the real estate sector. ECB relaxation will definitely enable developers to attract foreign debt investors with low cost of capital, although we will have to wait and watch for the eligibility criteria,” said Alok Saraf, Associate Partner, Grant Thornton Advisory Private Limited.
But more needs to be done.
KR Sekar, partner, Deloitte India said the announcements are welcome but the government need to come with a mega push to infrastructure and real estate sector which would incentivise job creation and create domestic demand.
"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. We all are working towards realising prime minister Narendra Modi’s dream of Housing for All by 2022 but it is becoming challenging if the requisite policy reforms will not be announced," said Jaxay Shah, National Chairman, CREDAI.firstname.lastname@example.orgGet access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.