Aiming to revive stalled housing projects and help lakhs of homebuyers, the government will explore the possibility of creating a stress fund. The idea is to use the fund - the industry has mooted its initial size to be Rs 10,000 crore - to complete the construction of housing projects that are stuck due to a variety of reasons, including a liquidity crunch with the real estate firms. This was one of the outcomes of a two-hour meeting between finance minister Nirmala Sitharaman and the real estate industry on Sunday.
The meeting was followed by a separate round of deliberations with various homebuyers' associations. Besides Sitharaman, the government was represented by housing and urban affairs minister Hardeep Singh Puri, minister of state for finance Anurag Thakur and top officials from the departments of economic affairs, revenue, housing, CBDT, corporate affairs and Rera. The industry was represented by Credai and Naredco. Sources said the real estate industry flagged an "unrest" on account of liquidity crunch and poor sales, which has created a "fragile situation". They demanded that banks and NBFCs be encouraged to fund real estate projects.
One of the sources said on condition of anonymity, "During the deliberations, it was decided that a group will be formed under Puri to explore the feasibility of creating a stress fund to complete pending projects. It will include cabinet secretary, housing and urban affairs secretary, corporate affairs secretary and the Rera chief. The group is expected to meet in the next two-three weeks."
Asked about the creation of a stress fund, Puri said: "We discussed a lot of issues" but refused to elaborate. The meeting was called against the backdrop of a virtual crisis in the real estate sector reflected in liquidity crunch, demand slowdown and stalled projects. The industry urged for inclusion of financial institutions under the ambit of Real Estate Regulatory Act (Rera) to aid completion of stalled projects. "Whatever problems are there of homebuyers, stalled projects etc, we are exploring ways to move forward. Many homebuyers have moved the Supreme Court and there are judgments too. So, it's a very complicated arena. But given the goodwill within the government, among homebuyers and the industry, whatever problems are there, we will find solutions for them," Puri said.
Credai chairman Jaxay Shah termed the deliberations positive, adding that the government is cognizant of issues impacting real estate, including liquidity crunch and taxation. Naredco president Niranjan Hiranandani said: "The issue of stalled projects in the NCR region and how it can be sorted came up." Homebuyers' body Forum for Peoples' Collective Efforts president Abhay Upadhyay said five lakh buyers have not got their dwelling units due to huge delays in delivery. He demanded the creation of a Rs 10,000-crore stress fund to complete such projects. To address the sector's issues, the industry associations suggested various measures, including reduction of interest rates on home loans to 7% and withdrawal of the recent NHB circular prohibiting subvention scheme. They also suggested that for real estate projects, which are commercially viable and require only last-mile funding by way of equity, the National Infrastructure Investment Fund (NIIF) can be a good source of funding.
This can be considered by NIIF if the requirement that real estate projects be covered under the 'infrastructure' definition and are not limited to affordable housing as defined under the harmonised list of infrastructure notified by the government is met.