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Special fund not enough to revive sector, say realtors

Last Updated 16 September 2019, 03:27 IST

The government's announcement of setting up a special fund with a corpus of Rs 10,000 crore to provide last mile funding for unfinished housing projects is unlikely to help the ailing real estate sector, which has been among the worst affected sectors due to NBFC crisis, completely.

Although the real estate sector has welcomed the move stating that it is a major boost to the housing sector (affordable and mid-segment), it does not help complete stalled projects that are under NPAs and NCLT, the industry experts said.

There is a possibility that not all homebuyers will get relief under the proposed fund. "The fund is only for projects in the affordable and mid-segment housing and to this effect homebuyers within the luxury segment may have to wait even further. There is no clarity of the price of mid-segment homes that will be included in this move," said Anuj Puri, Chairman, Anarock Property Consultants.

Nevertheless, this special window of funds will give many developers an opportunity to complete their stalled projects which were in dire need of capital and thus provide relief to lakhs of homebuyers across the country, he said.

Finance Minister Nirmala Sitharaman, on Saturday, announced the setting up of a special fund that would provide last mile funding for housing projects that are not categorised as non-performing assets and are not undergoing National Company Law Tribunal proceedings. While the government will provide Rs 10,000 crore, other investors like LIC and sovereign funds will put in roughly the same amount.

She also said that external commercial borrowing guidelines will be relaxed to facilitate financing for homebuyers who are eligible under the Pradhan Mantri Awas Yojana. The government has also proposed to lower the interest on house building advances.

The move will help the industry realise the prime minister’s vision of achieving “Housing for All” by 2022 and complete the unfinished projects stuck due to dearth of construction finance, said Parth Mehta, Managing Director, Paradigm Realty.

"These funds are not enough to give relief to the real estate sector as a whole. There are more than 5.5 lakh units that are stuck or delayed in top seven cities alone which would be much higher if we consider all cities and towns," Puri said.

Amit Modi, Director, ABA Corp has also urged the finance minister to extend the benefit of additional deduction of Rs 1.5 lakh interest, currently paid on home loans for properties up to Rs 45 lakh, to houses with higher amount, since the most of the population living in metro cities like Mumbai and Delhi will never be able to find accommodation up to Rs 45 lakh.

Welcoming the government's decision, Mohit Goel, CEO, Omaxe Ltd said the move will ensure speedy delivery of projects. The measures will play a pivotal role in enhancing the confidence of home buyers in the real estate sector.

Moreover, the prevailing yield on 10-year T-bills is hovering around 6.6-6.7%. The government's decision to link House Building Advance to it effectively means reduction of interest rate for government employees, which constitute the biggest chunk of home buyers. This also augurs well for the sector ahead of festive season, he said.

The real estate sector has also demanded the government to change the price definition of affordable housing based on different cities and a more democratic taxation approach to under-construction and ready-to-move properties among others.

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(Published 15 September 2019, 12:11 IST)

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