Boasting the Economy with a Stimulus Package
The Finance Minister Nirmala Sitharaman recently infused Rs 70,000 crore in PSB along with a slew of initiatives to boost India’s slowing economy. Infrabuddy examines its impact on the real-estate sector. The fact is it’s just not the real-estate sector but the whole economy is facing a slowdown in growth. Several reasons attributed to this, including global trade disturbances, internal issues, lack of timely policy support by the government, etc. With one of the world’s highest young working populations, the Indian economy cannot risk an economic stagnation.
The lack of liquidity has been a big roadblock in the growth of the real estate sector over the last few years. Now, developers whose projects are stuck due to the cash crunch may get access to liquidity and be able to complete their project on time. Timely completion of projects will boost homebuyers’ confidence. An improvement in the demand-supply dynamics will also mean that lenders will get their repayment on time. The real estate industry gets talking expressing their sentiments if this economical boost can bring some relief to the real estate sector.
Chintan Sheth, Director, Ashwin Sheth Group said the announcements included relaxation of external commercial borrowing guidelines for the affordable housing sector, lowering of interest rate on house building advance and linked with 10-year government security yields and special window for ‘last mile funding’ for projects out of NPA and NCLT ambit. The last mile funding would ensure having a dedicated fund of Rs 20,000 crore, with the government of India and investors contributing equally. Already certain investors have started showing first signs of interest to be part of this fund. These measures surely needed to address some of the liquidity challenges faced by the sector.
Last-mile funding will take care of stressed projects, thereby ensuring homebuyers do not get stranded by way of paying EMIs as well as bearing rental costs. Secondly, it will ensure that projects do not land up in NCLT or become NPA. The infusion of Rs 70,000 crores in PSBs, along with various initiatives announced by the FM, will boost market sentiments and revive many sectors, particularly the automobile, MSME, consumer and retail sectors, says Deo Shankar Tripathi, MD and CEO of Aadhar Housing Finance. “Housing is likely to get a big boost, with Rs 30,000 crores funds, including Rs 10,000 crores already given to the NHB for refinancing facility to HFCs. Measures to resolve home buyers’ and developers’ problems are also expected soon. The economy is likely to come back to normalcy, in three to four months,” adds Tripathi.
CII President Vikram Kirloskar said the macro impact of the economic package announced can be expected to be significant. “It is indeed commendable that all these multi-sectoral steps were carried out without pressure on the fiscal deficit. With her six-dimensional announcement, FM has indeed hit a sixer out of the grounds,” he added. Creation of a shelf of infrastructure projects and the announcement of a long-term financial institution have wide positive ramifications for the economy, he said.
Dr Niranjan Hiranandani – Founder & MD Hiranandani Group said it is a positive beginning and we see the potential for lifting real estate to normalcy. The reality is that real estate has been severely impacted by what I refer to as the Tsunamis – reforms that totally changed the paradigm. From demonetisation to implementation of RERA and GST, things have changed for real estate. It affected buyer sentiment since end-2016, and the impact carries on until the present day. There is a gradual improvement in homebuyer sentiment but other issues like liquidity crisis have severely impacted real estate developers’ ability to complete projects, resulting in delayed and stalled real estate projects.
The situation was negatively impacted with a crisis like the ILFS issue, resulting in credit squeeze that has only worsened the situation vis-à-vis credit issues and liquidity crisis for real estate developers actually creates something that remains to be seen. We hope for the best and will look forward to how things work out.
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