After a welter of measures announced by Finance Minister Nirmala Sitharaman last week to deal with the economic slowdown and then RBI surplus’ transfer on Monday, the government will announce a relief package for the real estate sector, under which a stress fund could be set up to help complete unfinished projects.
The announcement is expected this week.
Sources said liquidity problems and completion of stalled projects formed the core agenda of the meeting on Sunday between Finance Minister Sitharaman and real estate players which discussed ways to create demand in the country’s realty market.
Last Friday, she said the government would come up with “solutions” for stalled housing projects for stressed home buyers this week. Sitharaman announced more credit support to housing finance companies where she extended additional liquidity support to HFCs by the National Housing Bank, which has been increased from Rs 20,000 crore to Rs 30,000 crore.
The government is also likely to make changes to the definition of affordable housing as sought by developers so that more projects can come under the category. Further, bank loans for developers, which have always been an issue as banks try to avoid lending to developers, may witness some favourable changes.
Developers and distressed home buyers had suggested to the government that a fund be set up for completion of stalled projects.
Further, the real estate sector also received a shock after the National Housing Bank recently asked housing finance companies to stop funding under the subvention scheme. The government is likely to ease the recent direction in favour of developers.
After the Finance Minister met developers earlier in the month, Niranjan Hiranandani, the President of National Real Estate Development Council (NAREDCO), said that the issue of ways to use stress funds for financing stalled projects was discussed.
Hiranandani pointed out at the meeting that rationalisation of taxes and resolution of the liquidity crisis would be paramount in helping real estate and infrastructure get a boost, in turn enabling these to positively impact the economy in terms of GDP growth and job creation.
Jaxay Shah, President of CREDAI, said that the organisation had suggested the inclusion of financial institutions under the ambit of the Real Estate Regulatory Act (RERA) in order to aid the completion of stalled projects.
Creation of a stress fund and the inclusion of financial institutions under RERA are likely to figure the government’s upcoming announcement on the realty sector.
The home buyers’ association, Forum For People’s Collective Efforts (FPCE), in its letter to Sitharaman, had noted that the stalled projects can be solved with a stress fund of at least Rs 10,000 crore.
“It should also be ensured that the promoters of projects which shall be completed from this ‘stress fund’ should be stripped of all their assets including personal and company’s assets, to realise the entire funding utilised for completion of those projects,” it said.
Seeking amendments to the Insolvency and Bankruptcy Code (IBC), the forum said that as a home buyer is not a secured creditor, he or she would not be benefited in case of liquidation.