Real estate industry officials said the last-mile funding for housing projects in affordable and middle-income housing through a fund targeted towards projects which are 60% complete and are non-NPA and not in NCLT will have minimal impact.
Real estate sector is not enthused with the announcements made by the government on Saturday. While welcoming the steps as a move in the right direction, industry officials said these are too little and do not address the stressed asset situation currently at hand. Real estate industry officials said the last-mile funding for housing projects in affordable and middle-income housing through a fund targeted towards projects which are 60% complete and are non-NPA and not in NCLT will have minimal impact.
The fund will be on the lines of NIIF (National Infrastructure Investment Fund) and will see Rs 10,000 crore contributed by the government and the same amount will come from outside investors.
Recently, real estate industry bodies had made a representation to the finance ministry and one of their demands was to set up a fund for projects that are commercially viable and require last-mile funding by way of equity, with NIIF as a good source of funding. However, as the scope of the announcements is limited to only affordable and mid-income groups, the industry is not sure how much of an impact this will have, unless definition of the two segments are clarified.
Niranjan Hiranandani, founder and MD of Hiranandani Group, said, “There is a need to change the definition of ‘affordable housing’, and remove the price-cap of Rs 45 lakh while defining ‘affordable housing’ and focus on project size. I do not understand the logic why someone would think that Rs 45 lakh is a suitable benchmark for affordable housing, when it makes no sense for projects in Delhi, Mumbai and Chennai.”
Satish Magar, president at CREDAI, told FE that the problem of funding is with the projects that are stressed and dragged into NCLT. These have been left out of the scope of announcements. Also, by the time the fund is set up, the stress would have spread further.
“The projects have become NPA because the funding stopped after the start of the NBFC crisis. Therefore, the issue that is needed to be addressed is of making liquidity available for those projects. Also, by the time the fund is set up, the ones that may look standard accounts at present would also turn NPA,” Magar said.
According to government officials, the fund will address issues being faced by homebuyers of 3-3.5 lakh dwelling units, who are waiting for their houses as the developer has not been able to complete them.
Samir Jasuja, CEO of PropEquity, however, observes that the number of projects in stress is much bigger and the fund size will be too little to address the problem that runs into “few lakh crore”. “Maximum amount of construction has to be done in 2019, which is unfinished. Peak launches happened in India between 2011 and 2013, a lot of those projects have been delayed for several reasons and the roll over numbers of units not delivered coupled with the launched units of the next year would make the figure bigger. Of these, we need to analyse how many would be stressed,” he said.
According to ANAROCK, more than 5.5 lakh units are stuck or delayed in top seven cities alone, which would be much higher if all cities and towns are considered. Industry experts say one of the key industry demands to provide stimulus to boost housing demand in the sector continued to remain unaddressed. Shishir Baijal, chairman and MD, Knight Frank India, said, “The larger issues of demand creation have not been addressed in any way and form in these announcements. We will have to await the results of the measures and targeted relief announced by other sectors such as auto, manufacturing etc.”
Anuj Puri, chairman, ANAROCK Property Consultants, said these funds are not enough to give relief to the real estate sector as a whole. “There were many other demands in the wish list of the realty sector, which include a more democratic taxation approach to under-construction and ready-to-move properties, and all and any measures to attract long-term investors to push sales in the residential market.”