Finance Minister, Nirmala Sitharaman, on Saturday, 14th of September, 2019, announced certain measures related to real estate sector to boost the overall economy of the country. As per a report by Times of India, in her announcement, she mentioned the following points.
Simply put, the government of India has taken a step to acknowledge, rectify and regularise the growth of real estate sector in the country. And with the same intention, the government has announced a ‘last mile’ fund support of Rs 10,000 crores to complete the construction of stalled residential projects especially those developed for people with affordable and middle-income groups. The key objective of stress fund is to complete the construction of unfinished units owing to lack of cash flow. Reportedly, this move is said to be beneficial for over 3.5 lakh dwelling units across the country. The declared stress fund is said to let the families get their own house in the next two to three years, i.e., by 2021 or 2022. But, only time will reveal how it will benefit the thousands and lakhs of home-buyers whose investments are caught up in the projects with insolvency cases with the NCLT (National Company Law Tribunal).
In addition to this, with previously declared a total of Rs 30,000 crores liquidity support to struggling HSBs (Housing Sector Banks), relaxation of ECB (External Commercial Borrowing) guidelines for affordable housing have also been announced. FM Nirmala Sitharaman said, “ECB guidelines will be relaxed to facilitate financing of home-buyers who are eligible under PMAY (Pradhan Mantri Awas Yojana) in consultation with RBI (Reserve Bank of India)”. These new ECB for affordable housing will be applicable in addition to the already existing ones.
Also, it was announced that the interest rates on ‘house building advance’ would be reduced and would be linked to 10 year government security yields to encourage investment of government employees in the realty sector. Government employees make the most of the demand for housing sector in India. She also mentioned that the banks will launch repo rates or external benchmark linked loans as per the guidelines of the RBI. It will be strictly monitored whether the said norms are being followed or not. Repo rate can be defined as the lending rate of RBI to scheduled banks. Decrease in lending rates or the repo rate will in turn, reduce the interest rates on secured loans for borrowers. Thus, this will encourage more number of people to opt for secured loans from PSBs (public sector banks).
Considering all of these factors like reduced repo rates, merging of 27 banks into 12 PSBs, liquidity support of Rs 30,000 crores to struggling housing finance companies and now stress fund of Rs 10,000 crores to complete the construction of unfinished units, the realty sector is set to witness a boost in the coming two to three years. This kind of support from the government will motivate more number of people to invest in real estate in India. This will directly or indirectly boost the overall economic development of the country. Thus, it is no wonder that realty sector is said to contribute nearly 13 percent to India’s GDP (Gross Domestic Product).