Will NBCC be able to re­vive the realty mar­ket?

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Anuj Puri ht­spe­cial­pro­jects@htlive.com n The au­thor is chair­man at Anarock prop­erty con­sul­tants


De­spite the many in­ter­ven­tions by the gov­ern­ment that di­rectly or in­di­rectly ben­e­fited the realestate sec­tor in re­cent times, many press­ing prob­lems be set­ting this in­dus­try have re­mained un­ad­dressed.

Chief among them is the is­sue of stalled projects, which has been at the core of buy­ers’ disc on­tent. Tak­ing cog­ni­sance of this and sev­eral other is­sues, of­fi­ci­at­ing finance min­is­ter Piyush Goyal held a meet­ing with top bankers and in­dus­try stake­hold­ers to dis­cuss mea­sures that can be taken to bring the in­dus­try back on track.

After RERA, this was po­ten­tially the most di­rect and straight­for­ward move that the gov­ern­ment has take non be­half of the sec­tor.

On top of the agenda for this meet­ing was the pro­posal to rope in the Na­tional Build­ings Con­struc­tion Cor­po­ra­tion( NB CC) to com­plete stalled projects, a pre­dom­i­nant bur­den of which is NCR.


Even if 50% of the stalled projects are picked up by NBCC, the re­sul­tant con­struc­tion ac­tiv­i­ties would not get in­nu­mer­able home buy­ers off the hook. Also, if a gov­ern­ment en­tity like NBCC un­der­takes the con­struc­tion of stalled projects, the ap­pre­hen­sion that banks cur­rently have to­wards con­struc­tion finance would ease out.

Most stalled projects have good mon­eti­s­able as­sets in the form of land banks and FSI that NBCC can use to fund the con­struc­tion costs.

More­over, giv­ing a push to the con­struc­tion cy­cle is not only the need of the hour for the res­i­den­tial sec­tor but also bodes well for the in­cum­bent gov­ern­ment, which is fac­ing flak for lack of job cre­ation.

Un­fet­ter­ing stuck projects and open­ing up con­struc­tion fund­ing will cre­ate mas­sive em­ploy­ment op­por­tu­ni­ties, es­pe­cially for EWS and LIG seg­ments - the key tar- gets for af­ford­able hous­ing.


De­spite the num­bers sug­gest­ing an uptick in hous­ing sales and new launches in 2018 Q-o-Q, there is no deny­ing that res­i­den­tial real es­tate is yet to re­cover com­pletely from the damp­en­ing im­pact of RE RA, demo net is at ion and G ST. These reg­u­la­tory changes will yield pos­i­tive re­sults in the long term, but they have pushed the real-es­tatein­dus­try into a state of flux, and pro­longed the al­ready se­vere slow­down.

Liq­uid­ity has dried up and devel­op­ers are find­ing it dif­fi­cult to raise funds for pro­ject com­ple­tion. Ris­ing non-per­form­ing as­sets( NP As ), lower prof­its in the real-es­tate sec­tor and RBIs la­belling of the sec­tor as high-risk busi­ness has also cau­tioned banks to lend to devel­op­ers.

Though NB F Cs are pitch­ing in to fill the void cre­ated by banks, their in­ter­est rates are higher than those of banks. Lack of clar­ity on GST and a per­cep­tion that the GST rates are on the higher side have re­sulted in dwin­dling buy­ers’ in­ter­est in new launches and un­der-con­struc­tion projects.

With hardly any cus­tomer ad­vances, the liq­uid­ity crunch has brought sev­eral projects to a grind­ing halt. De­spite hav­ing all ap­proval sin place and with ev­ery in­ten­tion of com­plet­ing their projects, many devel­op­ers are ham­strung by lack of funds.

In­dus­try stake­hold­ers have given var­i­ous sug­ges­tions time and again, in­clud­ing the re­duc­tion of G ST rates in the sec­tor and al­low­ing bank fund­ing to devel­op­ers for land pur­chase.

Al­low­ing banks and HFCs to fund land pur­chase will help devel­op­ers bring down the cost sig­nif­i­cantly, which in turn can be passed on to the buy­ers.

In the ab­sence of bank finance, devel­op­ers re­sort to PE fund­ing and other non-for­mal modes of fund­ing to finance land pur­chase, which in­creases the cost of cap­i­tal for them dras­ti­cally.


As ev­i­denced by Piyush Goyal’s high-level meet­ing with in­dus­try stake­hold­ers, the gov­ern­ment is not obliv­i­ous to this grim sit­u­a­tion. Time and again it has taken mea­sures to bring back the buoy­ancy in the sec­tor.

From grant­ing in­fra­struc­ture sta­tus to af­ford­able hous­ing to in­creas­ing the size of car­pet area for MI GI and MI G II to widen the scope of projects fall­ing un­der the pre­ferred af­ford­able seg­ment, we have seen some ma­jor pol­icy moves–es­pe­cially to pro­mote the af­ford­able hous­ing mar­ket.

RBI too pitched in by re­vis­ing the pri­or­ity sec­tor lend­ing un­der af­ford­able hous­ing schemes. It in­creased the in­come limit for the eco­nom­i­cally weaker sections (EWS) to Rs 3 lakh per an­num from the pre­vi­ous Rs 2 lakh.

Sim­i­larly, for low in­come groups (LIG), the limit was re­vised to Rs 6 lakh per an­num from the pre­vi­ous Rs 2 lakh. These ini­tia­tives have had a pos­i­tive im­pact on the af­ford­able hous­ing seg­ment, re­sult­ing in a sus­tained im­prove­ment in new launches in the last cou­ple of quar­ters.

If we con­sider the 50% jump in over­all new­hous­ing launches in Q2 2018 over the pre­ced­ing quar­ter, af­ford­able hous­ing (homes priced be­low Rs 40 lakh) had the lion’s share of sup­ply.

In fact, af­ford­able hous­ing sup­ply in­creased by 100% in Q 22018 over Q1 2018, with the top seven cities( NC R, M MR, Chen­nai, Ben­galuru, Pune, Kolka ta and Hy­der­abad) wit­ness­ing new unit launches of around 50,100 units in Q 22018 over the 33,400 units in Q 1 2018.

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