Of these 1.6 lakh units, around 91,000 units have been sold to buyers who are waiting to get the possession of their houses, according to analysis of ratings and research firm PropEquity.
Of the total inventory of 13.8 lakh units in the mid to affordable category, only 1.6 lakh units, which is 11% of the overall inventory, will qualify under the stressed fund announced by the government on September 14.
The balance projects are already under NCLT or are NPAs and therefore do not qualify to avail the stressed fund window. Of these 1.6 lakh units, around 91,000 units have been sold to buyers who are waiting to get the possession of their houses, according to analysis of ratings and research firm PropEquity.
The sector is disappointed with the measures announced on Saturday, as it was seeking measures that would help revive demand and infuse liquidity. The government announced last-mile funding for housing projects in the affordable and middle-income housing through a fund targeted towards projects which are 60% complete, non-NPA and not in NCLT.
The fund, which will be on the lines of NIIF (National Infrastructure Investment Fund), will have Rs 10,000 crore contributed by the government and about the same amount from outside investors.
There are about 13.8 lakh units in the mid to affordable category that are approximately 60% complete and due for completion in the next two years. Of these, 4.4 lakh units are already on hold due to lack of funds and have been delayed for more than 5 years. Meanwhile, most of the developers for completion of these have already been taken to NCLT or are NPAs with the banks, and therefore do not qualify for the aid. Additionally, 3 lakh more units will be stressed out of the balance 9.4 lakh units that are under construction and more than 60% complete, and scheduled to be completed over the next 2 years.
Sector experts and developers told FE that the main problem of liquidity crunch for the developers is not being addressed fully by these measures. Projects that meet the above criterion will likely have access to other sources of credit, and that the Street was more hopeful to find a resolution for stressed assets that are not able to tap into conventional sources of funding, said analysts at Kotak Institutional Equities.
Samir Jasuja, founder and CEO, PropEquity told FE that Rs 90,000 crore is required if the stress in these 7.4 lakh units need to be addressed. Giving the math, Jasuja explained that over 80% of these stressed units are in Tier-1 cities where total cost of construction is much higher – about Rs 2,500 per square feet. It is estimated that last mile funding of about Rs 800 per sq ft out of the Rs 2,500 per sq ft will be required to complete the unfinished projects. The weighted average size per unit is 1,500 sq ft, thus about Rs 12 lakh per unit will be required to complete each unit.
He added that while the government had no role to play in the creation of the current crisis, it has further escalated due to the current NBFC crisis. NBFC crisis in India started unfolding post the collapse of IL&FS in September 2018. According to property consultant JLL, in 2018-19, net disbursals by NBFCs/HFCs to real estate developers declined by almost half from about Rs 52,000 crore in 2017-18 to an estimated Rs 27,000 crore. With banks unwilling to lend to realty developers, they have been increasingly dependant upon NBFCs/HFCs funding. Financial stress in Dewan Housing Financial Services (DHFL), and the most recent Altico Capital has spooked developers even further as there is no finance available, they said.
Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure, said though this is the first step to infuse liquidity in the sector, the housing sector requires a funding of over Rs 3 lakh crore. “We are also hopeful that, over time, the government will announce measures to spur job creation and confidence, thereby improving sentiments,” he said.