Budget 2020 Expectations for Real Estate: The move will give a boost to real estate and employment, and fill the demand and supply gap.
Budget 2020 Expectations for Real Estate: The real estate sector, one of the major sources of employment and a major driver for steel, cement and other ancillary industries, has been facing the liquidity crisis for quite some time. This has resulted in scores of unfinished and stuck projects that are not only affecting the housing supply and demand, but also employment. With builders not being able to finish projects, the supply chain has been affected. Despite demand in many markets, there are supply constraints, thus creating a void in the economy.
So what can be done? The solution is that the banks should start funding the projects and come out of the falsified sense of risk.
The situation arose as many developers defaulted on the loans, which resulted in banks adopting cautionary measures. Now banks have tightened norms and are reluctant in offering loans to the developers. However, bankers have to understand that their income is through the interest that they get on their funds and loans are the best option to generate it. Even after realizing the potential of the loan income, banks have taken a decision not to go ahead with giving loans to the developers.
The situation is contradictory as all these banks are open to providing home loans to the customers. However, the plan to get back the loan from the customers is missing in the scenario when the developer fails to deliver the projects because of the lack of funds.
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Basically, banks are ready to bet on the salaried class who is totally dependent on getting the product and then return the home loan and the same bank is not ready to fund projects of the developers, who have large chunks of land and are more capable of returning the money. We can say that risk analysis of banks has gone in the wrong direction. Bank should understand that you have to give nutrition to the seed in order to get good fruits.
If builders are not able to develop projects, then banks will not get new customers, which will lead to diminished housing demand. A major loophole has been created in the system and no one has worked on it. Banks should understand that real estate is going through a crisis; the government should call a meeting with banks to discuss the issues before the real estate sector so that stuck projects resume and contribute to the economy.
(By Anupam Gupta, Sales & Marketing, Director, GBP Group)