The Indian real estate sector has a reason to cheer as Finance Minister, today, announced the first tranche of the government’s economic package. The new package, which is equivalent to around 10% of India’s GDP, also includes the earlier Rs 1.7 Lakh Crore announced in March 2020 along with other measures launched by the Reserve Bank of India, including liquidity measures and interest rate cuts.
It is important to mention that the announcement is much in line with the government’s aim to spur economic growth and build a self-reliant India.
Extension of deadline for completion of real estate projects
Providing a significant relief to real estate developers, the government has extended the timeline for project completion and registration by six months.
Welcoming the move, Anuj Puri, Chairman, ANAROCK Property Consultants said, “This is a big move that will de-stress developers since construction activity had been halted across the country. Homebuyers’ wait for their homes will get extended by this move, but this was in any case inevitable.”
Considering the migration of construction workers, “It was much required as several developers could face challenges of aligning construction workers for the next few months,” added Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory.
Special liquidity scheme
The government has intended to resurrect the economy by reviving sentiment.
“The Rs 30,000 crore infusion in NBFC’s, HFC’s, and micro-finance companies with the help of debt papers and additional 20% emergency credit line to businesses will impact the real estate sector and bring in much-required liquidity for construction and project completion,” said Agarwal.
This will benefit the real estate sector significantly, given that NBFCs and HFCs are major lenders to it. As per ANAROCK research, NBFCs and HFCs together contribute almost 56% of total lending to real estate in India currently.
“Self-reliance will go a long way”
PM Narendra Modi has called for achieving self-reliance to fight and win the war against this pandemic.
According to Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure Limited, “Indigenous sourcing of raw materials and manufacturing of construction equipment in India will go a long way in making the real estate sector more self-reliant. Apart from this, self-reliance will also help in the generation of employment opportunities for the masses, which will surely boost the economy.”
Other announcements
- The 25% TDS reduction will benefit existing homebuyers as it will leave additional money in their hands.
- In another significant move to revive the MSMEs, the FM tweaked the definition of such companies to provide benefits to many more units. The collateral-free automatic loan for MSMEs worth Rs 3 Lakh Crore will give a lifeline to nearly 45 Lakh units for four years. “With this, the government aims to curtail job losses, and this could indirectly benefit affordable housing. Fear of job losses may have caused many potential affordable homebuyers to defer their purchase decisions,” said Puri.
In a nutshell, the first set of announcements adds up to almost Rs 6 Lakh Crore. However, the real estate sector is still hoping for further liquidity infusion. Reiterating the same, Niranjan Hiranandani, National President, NAREDCO said, “Industry is now pegging a big hope on much awaited fiscal relief to the second largest employment generating sector in the country. Liquidity infusion will be imperative to turn around the depressed scenario of the sector.”
Overall, “these measures will benefit the businesses across the country and will ensure immediate liquidity required for staring economic engines, post lock-down,” said Rohit Poddar, Managing Director, Poddar Housing and Development Ltd.
It is really motivating to see the kind of initiative Government of India has recently taken tu you not only stabilize but also how how real estate industry can now become a self made industry. This is really a positive message not only for developers but also for consumers. Government of India has taken steps maneuvering TDS, permitting extension to completion, infusing money through various financial institutes and much more.
The govt should consider a huge correction in the prices charged by the builders. the govt shoudl “Define” per sqft prices for localities and enforce the price for sale of flats. a petty 2 % will not make any difference. The govt should check the balance sheets of builders for last 10-15 years and ask the builders to slash their prices to bring it down to realistic prices. The govt should make builders to stick to RRR as per sqft price and eliminate unrealistic charges of 2 years tripled up maintenance charges, hand over charges, transfer charges, non accountable legal charges ect ect. these extra charges add up to over 30 % over and above the cost of the flat !! that 30 % should get wiped out completely. think from the point of view of age group 30-50 working class professionals who are your potential buyers. if a 1 bhk sells for 50-60 lacs they will buy. but they would rather prefer to live on rent of 25000 per month in the same space with more freedom to move out with just 1 months notice than buy a flat paying 70000 – 90000 EMI plus overheads of maintenance and parking fees and being stuck for 20 years !!
Modi Government has proved to be magical in various dimensions. It was much awaited to boost the economy with cash flow and boost up the people and not to think negative in any way possible.
Infusing money into the various industries and great support will be given to the MSMEs and will help to revive the overall economy. Real estate is also going to get a huge benefit from this step.