Chintan Sheth on FM’s Economic Stimulus Package -

Chintan Sheth on FM’s Economic Stimulus Package

Chintan Sheth Director Ashwin Sheth Group Expresses his Views on FM’s Economic Stimulus Package

Will the FM’s Economic Stimulus package help to revive the real- estate sector?

Earlier this month, the government had made its intention public that a stressed fund is on the way to help revive the real estate sector. Before this, industry association had submitted a list of measures needed to support and revive the housing sector.
On September 14, Finance Minister Nirmala Sitharaman finally unveiled the stressed fund along with other announcements to boost the housing sector. 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.

Chintan Sheth on FM’s Economic Stimulus Package
Chintan Sheth on FM’s Economic Stimulus Package

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 are 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.

However, not all the residential projects in the market are stressed. Hence, the package announced is not enough to revive the sector. Similarly, relaxation of external commercial borrowing guidelines and lowering of interest rate on house building advance too focuses on the liquidity concerns. The latter being largely for government employees, who are the beneficiaries of this announcement. On the other hand, there is more to be done to ensure the revival of the real estate sector at large. The government needs to also address concerns pertaining to demand creation, which would have a cascading effect on several sectors right from real estate to automobile to FMCG among others. More widespread reforms are the need of the hour to bring in relief to realtors.

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