The government's "Atma Nirbhar Bharat" package to battle the economic fallout from the coronavirus pandemic gave real estate developers few reasons to cheer. Measures included a temporary relief to builders from regulatory penalties in case of any COVID-19-caused project delay, a Rs 30,000-crore liquidity support to lenders, and an extended Credit-Linked Subsidy Scheme for the middle income group to push the affordable housing segment. The government's "Atma Nirbhar Bharat" announcements, part of a Rs 20 lakh-crore fiscal and monetary package, come at a time when the COVID-19-triggered lockdown has pushed the economy into a standstill, and hampered businesses operating in areas such as construction.
While property consultants say the measures are expected to boost housing and construction, some say more needs to be done as the overall economic slowdown may delay a revival for the sector.
Here are some of the key announcements for the realty sector under the "Atma Nirbhar Bharat" package:
Six-Month Relief For COVID-19 Delays
The government has allowed realty firms to claim relief from regulatory penalties for up to six months in case the completion of a project is delayed due to the coronavirus-triggered lockdown. Eligible property builders will get six months to complete projects registered under the Real Estate Regulatory Authority (RERA) laws due for completion on or after March 25.
The six-month extension in the projection completion and registrations will provide a major relief to developers, said Anuj Puri, chairman of property consultant ANAROCK. However, homebuyers will have to wait for their homes but that is in any case inevitable, he said.
Liquidity For Realty Lenders
The government has introduced a Rs 30,000-crore liquidity scheme for non-banking financial companies, housing finance companies and microfinance institutions to ensure sufficient liquidity for realty companies, which rely heavily on borrowing.
While the measures such as the extension of the RERA-imposed deadlines and additional liquidity for lenders was hailed by many property developers, some say more needs to be done to boost vital sectors such as real estate.
"The COVID-19 crisis has been a major blow to the real estate sector and to the economy in general... The government should make a separate fund allocation for the real estate sector, so that the construction industry is able to tide over the immediate cash crunch in the market today... Demand has obviously taken a hit in the short run," said Harvinder Singh Sikka, managing director at real estate company Sikka Group.
Rs 3 Lakh-Crore Boost For Small Businesses
The government has announced collateral-free - or unsecured - loans worth Rs 3 lakh crore for small businesses, in a bid to limit job losses, and tweaked the definitions of micro, small and medium enterprises to extend the benefit to a larger number of companies.
Many property experts say this is a positive step towards supporting real estate builders.
"This could benefit affordable housing indirectly. The fear of job losses may have caused many potential affordable home buyers to defer their purchase decisions," said Mr Puri. Non-banking financial companies and housing finance companies together account for almost 56 per cent of total lending to the real estate sector in the country, according to ANAROCK research.
"Given its place in the life of the country, real estate holds the key to a quick economic turnaround," added Mr Sikka.
Affordable Housing Push
Calling the extension of the government's Credit-Linked Subsidy Scheme for the middle income group "a big move"," ANAROCK's Mr Puri said: "This will help push demand for affordable housing."
The government extended till March 2021 the CLSS scheme for affordable housing, in a bid to support the lower rung of the middle class that earns an annual income of Rs 6 lakh-18 lakh.
"The CLSS extension will help demand for the affordable housing sector to inch back as and when the economy starts to revive. This in turn will help the construction sector," said Shishir Baijal, chairman and managing director at property consultant Knight Frank India. "However, for demand for housing to return, irrespective of the category, the economy must start growing at a stable rate providing financial security to individuals."
Currently, there are 15.62 lakh under-construction units across seven top cities in the country, nearly 39 per cent of which are in the affordable segment, according to ANAROCK.
Suspension Of Insolvency Cases
The government also suspended filing of new bankruptcy cases for one year, and said debts related to COVID-19 will not be treated as default under the insolvency law temporarily. Smaller property developers particularly susceptible to a funding shortage and low sales are likely to benefit from this, say realty consultants.
The government's measures fell short of real estate developers and consultants, say experts.
"Whilst we understand the constraints of the government, the announcements were inadequate in addressing the issues faced by the real estate sector," said Mr Baijal of Knight Frank.
"Overall, we feel disappointed that no direct demand stimulus was announced that could have benefited the beleaguered sector," he added.
THE WAY FORWARD
Property developers, already reeling under a prolonged period of low demand in the housing sector, say it might be few months before the construction work picks up due to COVID-19-related uncertainty.
"The real estate sector in the country is labour-intensive...and migration of labour has been a jolt to the sector... We will have to manage with the existing hands, motivate them and assure them of their safety. The migrated workforce will return, no doubt, on being convinced about their health and livelihood," said Mr Sikka.
"But India is basically a consumption-driven economy and given the sheer size of the population, the economy is bound to bounce back. As people return to work and economy gets back on track, there will be a renewed demand for houses," he added.
Mr Puri said one of the ways to tackle the COVID-19 crisis and revive economic growth is to urgently resolve impediments in the country's stringent land regulations. "Reforms are needed across the board - in regulation, ownership, operation, sale, leasing and inheritance of land," he said.
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