Bengaluru/Mumbai: The finance minister’s funding boost to stalled housing projects may revive a fraction of the ailing sector, while leaving a large section of buyers and stressed projects in the premium and worst impacted property markets such Mumbai and National Capital Region (NCR) in the cold.
In choosing the three parameters for projects eligible to avail the ₹20,000 crore special funding — affordable and mid-income projects, those that are 60% complete and aren’t non-performing assets or in National Company Law Tribunal— the government has cherry-picked the safest options among stressed projects, said property analysts and experts.
Projects that are 60% complete are at an advanced stage, would have likely received nearly 80-90% of customer receivables, making it relatively easier to procure last mile funding from financial institutions. Affordable housing are the bestselling projects in a weak market, and it is the premium and luxury homes that have been the toughest to sell.
Also, while affordable housing has been defined as under ₹45 lakh homes, the government is yet to clarify mid-income housing price range.
Niranjan Hiranandani, president, NAREDCO said that several delayed and stalled projects in National Capital Region (NCR), the worst impacted property market, are under NCLT and NPA and will not get the benefit of this stressed fund. The affordable housing criteria also severely restricts the eligibility of projects in Mumbai, NCR and Chennai.
Pankaj Kapoor, CEO of Liases Foras Real Estate Rating and Research Pvt. Ltd said that projects that are stuck at an early stage or are with NCLT are the worst impacted.
“...Projects which have not been complete even after receiving significant customer receivables indicates that there could have been diversion of funds. In that case, the government needs to evaluate these projects before offering last mile funding," Kapoor said.
As per government estimates, the funding incentives will revive and benefit 3-3.5 lakh homes out of around 8.5 lakh housing units across the country. The housing slowdown has put thousands of homebuyers in a spot, as they continue to wait for the possession of their homes.
"We estimated about ₹2 lakh crore is the need of the hour to take care of all such stuck projects. Even if you take away the ones which are NPA and in NCLTs, ₹20,000 crore is a bit short. But the main concerns still remain which is the demand revival. The overall economy is still struggling, so how will I get demand back in the game. So setting up a fund of ₹20,000 crore will only lead to a fractional movement of the market. As of now it is too less, may have to keep adding in times of come, " said Ghulam Zia, executive director at property consultancy Knight Frank India.
“...It is estimated that almost ₹40,000 crore of banks, non banking and housing finance companies are stuck in such last mile projects which have positive net worth and which can be delivered in less than a year within the key metro and urban locations in India. This corpus is hence sufficient to complete such profitable projects and release the stuck capital of financial institutions," said Amit Goenka, MD and CEO, Nisus Finance Services Co. Pvt Ltd.
However, not including projects in NCLT may significantly reduce the number of eligible projects, unless the matter is withdrawn by affected parties and then becomes eligible for these funds.