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Will government’s stimulation package for realty sector bear any fruits?

01 November, 2019
Will government’s stimulation package for realty sector bear any fruits?

Will government’s stimulation package for realty sector bear any fruits?

The fate of the real estate sector has been spiraling southwards since initiatives like demonetization (2016), the Real Estate (Regulation and Development) Act and the IL&FS crisis which broke in 2018. According to a report by Anarock, nearly 5.7

lakh units (launched in 2013 or before) are stuck in various stages of non-completion in the top seven cities, with the Mumbai Metropolitan Region (MMR) and the National Capital Region (NCR) having the most number of stalled projects. In this backdrop, the government was in a process to provide some respite to the ailing real estate sector and the latest move to provide priority debt financing for completion of delayed projects in the affordable and middle-income housing segment is a welcome step.

As a part of the announcement, the government would contribute Rs 10,000 crore into an alternate investment fund (AIF) whereas agencies like the Life Insurance Corporation and the State Bank of India would pitch Rs 15,000 crore to the corpus. It has been stated that the last-mile funding would be made available to projects which are net-worth positive ventures; affordable and middle-income housing project; on- going projects registered with RERA; reference by existing lender and include stressed projects classified as NPA and NCLT.

According to government estimates, this move could benefit nearly 1,600 projects with close to 10 lakh flats. It is also believed to lift the mood of a slowing economy and boost allied sectors like cement, steel, along with creating a multiplier effect on the job market, something that is the need of the hour.

According to estimates provided by Anarock, nearly 576,000 projects worth $63 billion could be running behind schedule across seven cities in India. There are numerous reports that give an estimate of unsold inventory worth Rs 9.38 lakh crore. In this backdrop, the government measure to provide relief appears to be a brilliant start which will help set precedents of government initiatives to support the real estate sector. However, while the decision is well-intentioned, one needs to understand the scale at which the real estate sector has been struggling to fathom if more is needed to be done.

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