Real estate gets boost with FM announcements

Photo: For representational purpose Finance Minister Nirmala Sitharaman announced several measures yesterday, including those for the real estate sector, construction contractors, the MSME sector, Discoms, among others. In this article, we take a look at the measures announced for the real estate sector. It has been announced that the Urban Development Ministry is to issue advisories for regulators to announce that COVID-19 can be used to invoke Force Majeure on contracts signed. All registrations registered after March 25, 2020, and contracts expiring after March 25, 2020, can be extended by six months without specific applications for it. CW lists industry expert reactions on the measures announced by Finance Minister Nirmala Sitharaman for India’s real estate sector... Anuj Puri, Chairman, Anarock Property Consultants: “The announcement is much in line with the government’s aim to spur economic growth and build a ‘self-reliant’ India. In the first of the series of announcements the FM will make over the next few days, the real estate sector, NBFCS/HFCs and MSMEs got a major boost on day one. Providing a major relief to real estate developers, the government has extended the timeline for project completions and registration by six months. This is a big move that will destress developers significantly, since construction activity had been halted all across the country. Homebuyers’ wait for their homes will get extended by this move, but this was in any case inevitable. Further, the announcement of Rs 30,000 crore special liquidity scheme for NBFCs/HFCs and MFIs will ease liquidity woes of stressed players. This will benefit the real estate sector significantly, given that NBFCs and HFCs are major lenders to it. As per Anarock research, NBFCs and HFCs together contribute almost 56 per cent of total lending to real estate in India currently. In another major move to revive the MSMEs, the FM tweaked the definition of such companies to provide benefits to many more units. The collateral-free automatic loan for MSMEs worth Rs 3 lakh crore will give a lifeline to nearly 45 lakh units for four years. With this, the government aims to curtail job losses, and this could indirectly benefit affordable housing. Fear of job losses may have caused many potential affordable home buyers to defer their purchase decisions.” Ramesh Nair, CEO and Country Head (India), JLL: “This is the first set of special economic measures announced as a part of PM Modi’s ‘Self-Reliant India’ movement announced last evening. The fundamental of any economy is employment generation and the Government of India has made the right interventions by providing the requisite support to MSMEs. The revitalisation of MSMEs will play a major role in the overall revival of the economy. This in turn is expected to have a positive impact on the consumer sentiment, which has an important bearing on the real estate sector. The benefits will help boost MSMEs as they begin to restart operations and is expected to ease timely and adequate availability of raw materials including construction raw materials and inputs, which flow into the real estate sector. The government of India has addressed the challenges of MSMEs through a combination of initiatives. These include setting up an emergency credit line of collateral free RS 3 lakh crore from banks and NBFCs, and a Fund of Funds with a corpus of RS 10,000 crore with an objective of infusing total Rs 50,000 crore to provide equity funding for MSMEs with growth potential and viability. The government is also facilitating the provision of RS 20,000 crore subordinate debt to stressed MSMEs, and limiting competition for them from foreign companies. These measures provided to MSMEs will also go a long way in protecting jobs and ensuring income continuity. This in turn will have a positive bearing for potential homebuyers especially in the affordable and mid segments. The special liquidity scheme of Rs 30,000 crore with government guarantee for buying investment grade debt paper and Rs 45,000 crore under the partial credit guarantee scheme for the NBFCs/HFCs/MFIs will provide much needed liquidity for the sector. The easing of liquidity is likely to help the NBFCs and HFCs to support the real estate sector through restructuring of existing loans and resetting of repayment schedules. The Central Government’s advisory to the state governments to invoke the ‘force majeure’ clause has come as the much-needed relief for real estate developers. This will now provide for a six-month suo-moto extension for project registration and completion of projects (with scope for a further three-month extension), which are due for expiry on and after 25th March. This will definitely benefit developers as the construction activity has been adversely hit due to the ongoing lockdown. This also gives elbowroom, as the sector gradually restarts its operations with the expected gradual ease in lockdown. It will aid in smoothening the operations as they will have to grapple with issues related to adequate availability of labor due to reverse migration and supply chain issues with respect to timely availability of key raw materials such as cement, steel, etc.” Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa, CBRE “Hon’ble Finance Minister Nirmala Sitharaman introduced progressive provisions for the MSMEs, NBFCs, contractors and real estate project registrations. The announcement to treat COVID-19 as an event of ‘Force Majeure’ and as an ‘Act of God’, and permission to extend project completion timelines and other statuary compliances under RERA by six months is a positive step for the developer community. It will enable them to deliver projects to the end consumer under the new timeline. In addition to this, the announcement of liquidity measures for NBFCs and HFCs is also an encouraging step and will provide much needed relief to the sector.” Shishir Baijal, Chairman & Managing Director, Knight Frank India: “The announcement by the Finance Minister was eagerly awaited by the real estate sector hoping to receive a new lease of life mostly from challenges emanating from liquidity and demand challenge. To enhance liquidity support and to assuage risk concerns a further expansion of partial credit guarantee scheme for the NBFC/ HFCs has been provisioned. This will hopefully enthuse lenders to look at the sector favorably. On the lockdown related impact on labour shortage and construction delays, extension of registration and completion date of real estate projects under RERA by 6 months will provide some relief to the sector. We now await to hear the subsequent announcements, that could resurrect demand and also boost infrastructure sector, to make a complete assessment of the impact on the real estate sector.” Niranjan Hiranandani, National President, NAREDCO: The first set of announcements made by Finance Minister Nirmala Sitharaman adds up to almost Rs 6 lakh crore; the announcements missed fiscal stimulus for real estate. The announcement related to the regulatory aspect; of extension of dates under RERA by allowing ‘force majeure’ with the Urban Development Ministry issuing advisories to states and UTs to treat the COVID-19 period as an 'Act of God'. In terms of actual implementation, fresh project registration certificates can be issued as also, registration and completion dates extended ‘suo moto’ for up to six months. This is indeed a move to combat COVID disruption which practically brought construction work to a grinding halt with additional chaos of migrant labourers’ movement and raw material supply disruption. Relaxation in project timelines under RERA Act will bring in sigh of relief to the developers and safeguard the interest of homebuyers with the revised new timelines for their dream home deliverables. This ensures homebuyers trust in the project and grants breather to the developer’s fraternity for coping up with backlogged work due to natural disaster delays. Industry is pegging a big hope on much awaited fiscal relief to be granted to the second largest employment generating sector. Liquidity infusion will be imperative to turn around the depressed scenario of the sector. The other announcement which is positive for real estate is the announcement of Rs 30,000 crore special liquidity scheme for Non-Banking Finance Companies (NBFCs) and Home Finance Companies (HFCs) and Micro Finance Institutions (MFIs). NBFCs and HFCs are major sources of credit for real estate, the impact should be easing of the liquidity crisis, especially for stressed players.” Sanjay Dutt, Managing Director and CEO, Tata Realty and Infrastructure: “We were hopeful that the FM’s economic package will provide some momentum to the ailing sector to put it back on the path of sustainable growth. We welcome the Government’s decision to treat the COVID-19 period as an event of force majeure to extend the registration and completion date by 6 months for all registered real estate projects. This will certainly alleviate a great amount of stress on the developers and also help homebuyers get their dream homes in the stipulated amount of time. Without such a bold decision, it would be very difficult for the real estate sector to continue growing amid these adverse situations. Additionally, the granting of three to six months extension to all contractors without extra costs will also help the sector significantly. Due to the lockdown, migrant labourers have been displaced and all construction work came to a grinding halt. We appreciate the Government’s cooperation to help developers and contractors deal with forces that are beyond our control. PM Narendra Modi has rightly called for achieving self-reliance to fight and win the war against this pandemic. We are certain that indigenous sourcing of raw materials and manufacturing of construction equipment on Indian soil will also go a long way in making India’s real estate sector more self-reliant. Apart from this, self-reliance will also help in generation of employment opportunities for the masses which will surely boost the economy. However, we are also hopeful for a temporary reduction or waiver of GST for the sector, additionally providing some income tax benefits for home loans would have supported the demand for housing and helped to achieve the government’s objective of Housing for All.” JC Sharma, Vice Chairman and Managing Director, Sobha: “The Finance Minister Nirmala Sitharaman has delineated the first tranche of Rs 20 lakh crore package. Our FM presented a comprehensive vision to make India a self-reliant nation by focusing on MSME’s, construction, real estate, NBFC’s and Micro Finance. We welcome these laudable steps by the government towards the most crucial sectors that contribute significantly to the growth and employment of the economy. In support of the real estate sector, an announcement on extension of registration and completion dates of projects suo-moto by six months of all registered projects, expiring on are after March 25, 2020 without individual application is very thoughtful. Further, the Ministry of Housing and Urban Affairs will advise States/UTs and their Regulatory Authorities to treat COVID-19 as an event of ‘Force Majeure’ under RERA. The regulatory authorities can extend this as required for 3 months and a fresh “Project Registration Certificate” can be issued with revised timelines. The extension for various statutory compliance under RERA will further aid in providing ease to developers and buyers. Additional support of one-year extension has been provided by the government for loans by NBFCs to commercial real estate sector from the date for commencement for commercial operations (DCCO) will spur the growth and de-stress the sector. All these steps will ease the current situation, preserve financial stability and assure the homebuyers of delivery of their booked houses with revised timelines. While this was the first addressal in a line of series by Nirmala Sitharaman, we look forward to further announcements that will address the woes of the sector and economy.” Pradeep Aggarwal, Founder & Chairman, Signature Global Group and Chairman, ASSOCHAM National Council on Real Estate, Housing and Urban Development: “The relief provided to the common man under EPF will help the affordable segment a great deal. The buyers of affordable fall in this category and they will be elated to get extra money at their disposal. COVID-19 situation has made everyone realise the importance of making safe investments and having a roof on one's head. With extra disposable income, these beneficiaries of the announcement made by the FM will go for buying real estate assets. Other announcements regarding extending the timelines under RERA authority will help a great deal in providing relief as buyers will understand the reason behind delivery date extension.” Alok Saraf, Associate Partner, Grant Thornton Advisory: “The provision of Suo Moto extension of due dates under RERA will definitely benefit developers whose projects were due for completion during the lockdown. The real estate sector continues to be hopeful for a credit guarantee scheme similar to the one being provided to the MSME sector announced by our honorable FM.” Abhilash Pillai, Partner, Cyril Amarchand Mangaldas: “Decision to treat COVID-19 as an event of ‘Force Majeure’ under Section 6 of RERA and extension of registration and completion date are proactive steps from the Central Govt. This will certainly help the developers, especially in a situation, when they are facing supply chain disruption and shortage of labour. The developers will also be able to pass on the benefit to the home buyers, by extending the payment schedule, who are facing pay cut/ job less threats on account of Covid-19.” Sharad Mittal, CEO, Motilal Oswal Real Estate Fund: “The FM has announced a suo moto relief of 6 months for the RERA completion timelines for all projects in all states with an additional window of three months that can be granted by the individual state authorities. Considering that projects are likely to be delayed by at least 4 to six months due to the lockdown, this is a welcome move for all real estate developers. However, it does not address the larger liquidity and cash flows related challenges faced by the developers.” Rohit Poddar, Managing Director, Poddar Housing and Development Ltd. and Joint Secretary, NAREDCO Maharashtra: “The announcement of the overall 20 lakh crore package is much awaited news which will stimulate progression sectors across the country. With an aim to encourage MSME’s to get them listed on main board of stock exchange; 50,000 crore equity is infused which will help them in tackling the shortage of funds. The supply of Special Liquidity Scheme for NBFCs/HFC/MFIs along with Rs 45,000 crore Partial Credit Guarantee Scheme 2.0 for NBFCs will provide liquidity support and create confidence in the market. Extensions of 6 months for real estate projects will de-stress real estate developers and ensure completion of projects so that homebuyers are able to get delivery of their booked houses with new timelines. Overall, this announcement will benefit the businesses across the country to uplift the growth of their business and ensuring immediate liquidity required for staring economic engines, post lockdown.” Arvind Subramanian, CEO, Mahindra Happinest: “Good quality and affordable housing is both a basic human need and a public health enabler as we have seen in the patterns of spread of COVID-19. The government’s #AtmaNirbharBharat initiative is visionary and brings to the fore the social and economic significance of India’s real estate sector. The easing of RERA provisions, especially the six-month extension, will help real estate developers better plan operations and ease the disruption caused by the pandemic. This is important since social distancing measures and the restriction of movement at construction sites is expected to impact project timelines. The Rs 30,000 crore Special Liquidity Scheme for NBFCs and HFCs is also a welcome move. It will ensure banks and NBFCs can continue funding housing projects for developers and mortgages for homebuyers.” Kamal Khetan, Chairman and Managing Director, Sunteck Realty: “The government has packed much punch in the “Atma Nirbhar Bharat” package, aimed at boosting Economy, Infrastructure, Technology, Demography and Demand. We also appreciate the attention to basics like land, labour, liquidity and law where key structural reforms are expected, paving the nation’s way to a global manufacturing power house. Specifically to real estate, we believe that the attempt to infuse more liquidity as well as to extend a helping hand to the struggling projects by relaxing RERA deadlines is very timely and appropriate.” Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani: “The bold economic measures announced display the government’s strong commitment to tackle the unprecedented challenges and restore confidence and faith in the economy. Providing an extension for completion of projects and treating the Coronavirus outbreak as an event of ‘force majeure’ under RERA, brings a major relief for the sector that has been the backbone of the economy. During the lockdown, the construction industry has nearly come to a standstill thus negating the green shoots that had just begun appearing prior the pandemic came to the fore. In order to tackle the subdued demand from home buyers during and post COVID-19, reduction in interest rates on home loans will encourage fence-sitters to act quickly to invest in a property. Government measures towards improving liquidity and providing a boost to the MSME sector is also commendable. The Special Liquidity Scheme of Rs 30,000 crore for non-banking financial companies, microfinance companies and housing finance companies will bring in liquidity in the market. The various economic measures announced by the government during COVID have given a powerful booster dose to revive the Indian economy. The resolution to remain self-reliant coupled with revolutionary reforms will surely lead the country on a high growth trajectory.” Amit B Wadhwani, Managing Director, Sai Estate Consultants Chembur: “The announcement made by our honorable Finance Minister about extension of registration and completion date of real estate projects registered under RERA is a positive move for the real estate sector as whole which has been distressed since the lockdown. This gives some relief to ensure the completion of the pending projects. For the revival of the sector under several restrictions and to infuse liquidity, we look forward to more such steps as real estate sector is a significant contributor to the GDP. However, to kick-start the construction activities, we need labour support, and given the current situation that is what needs more attention. Apart from procuring of raw material and their increased prices, the labour crunch is going to be a potential crisis for the real estate industry to deal with shortly. With no timeline to the pandemic coming to an end, the return of labour will be something that cannot be ignored by the industry or by various sectors affected.”