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Cheaper loans, government sops to boost housing demand this festive season

real estate, real estate in India, Cheaper loans, lower EMIs, government sops, boost housing demand, festive season, Union finance minister Nirmala Sitharaman

Hopes of lower EMIs and the possibilities of cheap housing loans have kept home buyers excited over the past few days with the Central government set to bring in much-needed respite for them. Announcing a financial stimulus package aimed at reviving the economy, Union finance minister Nirmala Sitharaman had promised in New Delhi recently that the Central government will soon announce a set of measures for ameliorating the problems faced by homebuyers.

The measures will be specifically aimed at homebuyers in the NCR, many of whom are under great financial burden for non-delivery of flats within the stipulated time limit. The set of measures will have a bearing in the housing market in Mumbai as well.

Recently, the Central government decided to recapitalise public sector banks by releasing Rs 70,000 crore upfront, which is expected to bring more liquidity into the market. The government also announced an additional Rs 30,000 crore to housing finance companies through the National Housing Board that is expected to revive stuck projects and ensure timely delivery of booked units to end users.

In addition, the Reserve Bank of India has agreed to release Rs 1.76 lakh crore to the Central government which will further increase liquidity and provide capital for the real estate sector.

The stimulus packages are apart from the policy decision announced by the finance minister that rate cut benefits given to public sector banks by the Reserve Bank of India will henceforth be passed down to borrowers. The gamut of stimulus packages and policy decisions have brightened the prospects for cheap loans and low EMIs.

Homebuyers are awaiting announcements from banks and financial institutions of rate cuts on interests upon loans. Drop in interest rate on loans is expected to boost demand for mid-range properties.

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The measures are extremely pragmatic and would go a long way in fulfilling Prime Minister Narendra Modi's dream of achieving the target of Housing for All by 2022.

The slew of measures are expected on the backdrop of meetings held by Finance Minister Nirmala Sitharaman with real estate bodies and federations of homebuyers in New Delhi recently. The FM had met the representatives of real estate developers from the Confederation of Real Estate Development Authority of India (CREDAI) and the National Real Estate Development Council (NAREDCO).

Both the real estate developers' bodies had stressed upon liquidity crunch and poor sales in the sector owing to lack of availability of loans at competitive interest rates. A huge amount of unsold inventory is lying in major cities of the country due to liquidity crunch. Homebuyers had stressed upon stuck projects and the fact that units were not being handed over to end users within the stipulated time-frame.

The festive season is set to begin this year. The month of September has been marked by the Ganesh Chaturthi festival, which will be followed by Navaratri. This is to be followed by Durga Puja in the month of October and Diwali soon thereafter. For homebuyers this is the opportune moment to book new residential units or register their properties. The festive season is also when first-time home buyers generally book their dream homes by entering the real estate market.

A slew of positive measures for homebuyers, if announced by the Union finance minister, are expected to boost the housing sector by increasing sales during the festive season.

As per reports, enquiries for affordable flats, small and medium-sized independent plots and mid-range apartments have picked up in the first and second fortnights of August. However, enquiries for high-value houses are low as compared to the same period in previous years. If the nature of enquiries is anything to go by, high-value residential units are likely to be hit if there is no immediate reduction in interest rates on loans.

While banks and non-banking financial companies are likely to come up with attractive loans following the stimulus injected into the economy, the government might do well to create a stress fund for helping complete unfinished projects. The objective of creating a stress fund is to ensure that all pending projects are completed within a maximum period of five years. A stress fund will also ensure that homebuyers are saved from additional costs at the time of delivery often passed on to them owing to increase in market costs of raw materials.

In a further step that could boost revenues of the state exchequer as well as bring in more transparency in registration of properties, the government could consider revising stamp duties on newly-purchased houses. This will boost demand and increase sales of residential housing projects apart from ensuring that government coffers are replenished with regular registration of properties.

(By Vaibhav Jain, CMD, Rise Group)