The government has announced plans to set up a Rs 20,000 crore stress fund to revive real estate industry, while it is a step in the right direction real estate data and analytics platform Prop Equity’s estimates requires approximately Rs 90,000 crores will be needed to cure the housing sector of its ills.
The government's move is meant to revive stalled projects in the affordable and middle income housing category. This special window will provide last mile funding for housing projects which are non-NPA (non-performing assets) and non-NCLT (National Company Law Tribunal) projects and will focus on unfinished projects. It is a very positive move by the government for the revival of the real estate sector in the country.
It is also important to point out that the government really had no role to play in the creation of the current crisis. The impact of the goods and services tax (GST) and demonetisation on the stressed projects discussed in this release was minimal as these projects were in the affordable and mid category and thus cashless as they required maximum housing finance.
The government also reduced the GST last year to provide relief to the developers and to the sector. In fact, the current crisis has been a consequence of key causes such as lack of execution capability of developers, oversupply of inventory, excessive land banking, lack of understanding of the demand supply dynamics, unjustified price appreciation, and lack of social and physical infrastructure in emerging markets. The crisis today has further escalated due to the current non-bank finance companies (NBFC) crisis.
1. Projects to be completed by December 2021, i.e within 2 years 2. Only Apartments, Ind Floors, and Villas are considered 3. Hold projects details provided separately 4. Current price of the projects <= MMR <= 7500, Gurgaon <=6000, Ahmedabad <=4000 and remaining Tier-1 cities 5000 and remaining tier-2 cities <= 3000 psqft considered 5. Tier-1 - Ahmedabad, Navi Mumbai, Bengaluru, Kolkata, Chennai, Faridabad, Ghaziabad, Greater Noida, Gurugram, Hyderabad, Mumbai, New Delhi, Noida, Pune, Thane Tier-2 - Agra, Amritsar, Vadodara, Nashik, Bhopal, Coimbatore, Dehradun, Gandhi Nagar, Chandigarh, Bhiwadi, Bhubaneshwar, Vijayawada, Indore, Jaipur, Kochi, Ludhiana, Mangalore, Mohali, Mysore, Nagpur, Goa, Panipat, Raipur, Sonepat, Surat, Trivandrum, Lucknow, Guntur, Visakhapatnam 6. All Prices and sizes are considered on Super Area
As a result of the cumulative impact of all the above factors, this crisis according to Prop Equity’s estimates requires approximately Rs 90,000 crores for resolution. In addition, to this many other areas will need to be addressed to resolve the crisis in totality. The details of this value are explained as under:
The need for correct fund allocation
In order to identify the most deserving projects it is necessary that all the projects that are eligible for this fund allocation are accurately identified and analysed so that the maximum consumers derive the benefit from this aid. PropEquity has assessed the data of housing units priced in the affordable and mid housing category across tier 1 and tier 2 cities.
With the objective of providing maximum benefit to the consumers, in addition to providing the funding, it is crucial for the government to analyse the deserving projects which will the aid on various parameters including absorption in each project, developer track record, demand supply dynamics to name a few.
Samir Jasuja, founder and managing director, PropEquity said: "The government has been magnanimous and sensitive in its allocation of the stress fund and in adopting this crisis which got created due to many factors that were well beyond the government’s control. This is definitely a positive move and we hope that the government will take more steps in the future to help the industry tide these turbulent times”
In summation, the stress fund will provide the much needed reprieve to the selected projects through a process of effective allocation. In addition, there will be a requirement for more such boosts if the real estate distress needs to be eradicated from the root.
First Published: Sept 16, 2019 4:10 PM IST
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