Occasionally, we come across terms like legacy issues and inherited problems. These terms could well be applicable to contemporary real estate in India. The Narendra Modi-led Central government, however, has been striving to rid the sector of such adjectives, by making things more transparent and providing better solutions to homebuyers.
As if on cue, a slew of measures like RERA, GST, Housing for All by 2022 mission and the push to affordable housing have all been unleashed to transform this sector.
However, at this juncture, with several economic stimulation measures being taken by the government, Indian Real Estate Inc. is almost expecting a relief package to be announced very soon.
The ongoing liquidity crunch is arguably the biggest problem plaguing developers at a time when housing demand is reviving slowly. Second on the list is a way forward for the thousands of residential projects which are wither stalled or lie in various stages of incompleteness. Finance Minister Nirmala Sitharaman has already held meetings with key real estate developers and nodal agencies, where these were reportedly the two biggest issues on the agenda.
So, what does the real estate sector expect?
Developers have been asking for the creation of a stress fund for the completion of stalled and pending projects in order to bring relief to innumerable homebuyers and improving the sentiments of the common home buyer thereof. The Union Finance Minister empathizes with those suffering and has already stated that there will be solutions offered for stalled projects while extra liquidity assistance has been given to housing finance companies by the National Housing Bank (NHB), in the form of allocations being scaled up to Rs 30,000 crore from Rs 20,000 crore.
Watch: How To Withdraw PF Online
Steps in the right direction for sure. But property developers could truly benefit from government mandated access to easier bank loans and other sources of funding if such a solution is enforced.
Higher credit allocations for housing finance players will help infuse higher liquidity into the sector, boost demand for housing and speed up construction and completion of projects.
A stress fund of Rs 8,000 to 10,000 crore, as is being speculated, would help complete key stalled projects and boost confidence amongst developers and homebuyers alike.
Also, if the government changes the definition of affordable housing to cover units priced up to Rs 70 lakh in urban zones, as requested by developers, the whole sector will benefit from raised demand and higher sales.
Another critical issue faced by developers was the directive issued to HFCs by the NHB to desist from funding based on subvention schemes. This could be relaxed by the Central government in order to rapidly bring much-needed relief to real estate developers.
The Indian real estate and infrastructure sectors are back bones of the economy and account for a major chunk of job creation and GDP growth, which necessitates a special package, deployed solely to rid the sector of its ongoing woes. A one-sided effort, however, cannot transform something so big and so deep in the slush.
Now, more than ever before, real estate developers need to take their own share of a few extra steps; a commitment to quality and on time delivery should be the first one. Transparency, financial discipline and responsible capital management must follow quickly to complete this transformation for the better and combat the legacy issues of the past, en route to a smoother present and a robust future.
(By Rahul Purohit, Principal Partner and Head-Real Estate, India, Square Yards)