FM Sitharaman hints at a mega booster for real estate

Finance Minister Nirmala Sitharaman. (DH photo)

The Centre is working with the Reserve Bank of India to tweak existing norms, including that of funding regulations, in the real estate sector to lift it out of a prolonged slump. Finance Minister Nirmala Sitharaman on Tuesday indicated more relief to the sector in coming days, which she said, had a spillover effect on many other sectors.

The move comes after a rampant decline in the output of India's core sector industries, including steel, cement, electricity and coal of which the real estate is the largest consumer.

"One particular sector, I have not completely addressed is the real estate sector. The real estate sector requires a lot more attention. Its sluggishness needs to be addressed to arrest the spillover effect on other sectors," Sitharaman said at the silver jubilee celebration of the National Stock Exchange (NSE) in Mumbai.

The minister said the government was also open to taking help from private funds, be it foreign or sovereign funds, to boost the sector. Stricter RBI norms for banks dispensing housing loans, especially to stalled projects, has left the real estate sector battling for cash.

While the government is expected to tweak GST and stamp duty for home buyers, the RBI may reconsider its asset classification rules to allow funding for stalled projects to the real estate sector. Strict NPA guidelines have choked funding to the sector even after the RBI injected liquidity onto the banking system.

Sitharaman said the government's attempt to boost the real estate sector will not only help the core industries, which are suppliers to the real estate but also the home buyers, who are looking up to the government for some such solution.

According to the prevailing RBI guidelines, the buyers availing home loans have to pay 30% of the property cost upfront. Besides, the under-construction homes attract 5% GST for premium mid-range properties and 1% for affordable homes. This has moved buyers away from the purchase of under-construction homes to ready-to-move ones.

Real estate sector is also suffering the woes of NBFC crisis. Private equity funds have, however, shown interest in the sector with an investment of over $4 billion so far this year, data shows.

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