Pankaj (name changed) and his wife Neelima (name changed) work in two reputed media organisations and about 9 years ago, they booked a duplex flat in Noida. Along with other projects, that also got stalled due to various reasons, including the financial constraints faced by the developer.
As both of them are working, they were in position to prepay the existing home loan and took another home loan to buy a ready-to-move flat of smaller size, in which they readily moved from their rented accommodation.
On the other hand, Prayag (name changed), who also works at a senior position in a reputed digital media company, got stuck between the dual burden of monthly rent and EMI and that too without any income tax benefits.
Not only them, but the government’s decision to create a Rs 25,000-crore fund to help complete stalled housing projects would benefit lakhs of people.
A study by ANAROCK Property Consultants, showed that top 7 cities in India have over 19 lakh under-construction homes. Of these MMR & NCR comprise 60 per cent or about 11.4 lakh under-construction units, Pune has 16 per cent share with over 2.97 lakh units in various stages of construction, Bangalore, Chennai & Hyderabad-comprising 19 per cent share-have nearly 3.65 lakh units under construction and Kolkata has approximately 95,100 under-construction units.
Out of the 19 lakh under-construction homes, nearly 5.76 lakh units were launched in 2013 or before and are still stuck in various stages of non-completion and would get benefits of the fund.
Not only home buyers and developers, as the fund would offer an alternate funding channel to net worth-positive projects that have been stalled because of operational liquidity/credit availability issues, it would also benefit some real estate-focused non-banking financial companies (NBFCs) and housing finance companies (HFCs) by reviving viable projects that were classified as non-performing assets (NPAs).
However, it is not clear if all the stalled projects would be eligible to avail the benefit of the fund.
"This will create a new avenue of relief and will help restore some buyer confidence. Most of the benefit will be felt in Mumbai and NCR. One question still unanswered is whether the programme will be expanded to include a wider range of eligible projects, as the current definition does limit the inclusion of a vast number of projects that could benefit," said Kiran John, Joint Managing Director, Terapact.
Even if half the stalled projects are completed with the help of the fund, nearly 3 lakh homes will be available for occupation along with about 13 lakh homes under ongoing projects.
"We have not decided yet, if we move to the stuck up flat once it’s handed over to us, or stay on the presently-occupied flat," said Neelima, adding, "We will put one the flats on rent and may consider to sell only if we get good price."
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Like Pankaj, Neelima and Prayag, lakhs of others will also either shift to the new house, once the projects are completed or put them on rent. So, with around 1,66,130 units remained unsold due to lack of demands in Delhi-NCR alone, unless there are adequate demands to match the supply, both rentals and prices may see downward pressure. With lots of houses available at affordable rent, people may postpone buying houses till buying also becomes affordable.
According to India Ratings and Research (Ind-Ra) with stalled projects coming on stream, the demand-supply imbalance is likely to worsen, and if overall housing demand does not witness a recovery, pricing pressure in the sector is likely to be exacerbated.
"Demand in the affordability segment has been strong and in several cases sufficient to fund cash flow issues already. Badly planned and executed projects may need to resort to heavy discounts to sell inventory even with this help," said John.
So, along with providing relief to distressed home buyers, whose dream homes remain unfinished, and developers facing financial crunch as well as NPA-hit financiers, there are chances that both house rents and home prices would become cheaper, until the demand picks up.