CREDAI seeks government intervention to ease credit freeze in Indian real estate

-Emphasises on the importance of liquidity support to reinstate industry growth. -Recommends a bouquet of options to the government to resolve the issue In a letter written to the PMO, the Confederation of Real Estate Developers' Associations of India (CREDAI) has requested the Prime Minister of India Narendra Modi to intervene in a bid to ease the credit freeze in the Indian real estate sector amid the lack of availability of funds to developers for completion of real estate projects. This scenario is leading to an adverse impact on the entire real estate eco-system, with ultimately the homebuyers not getting timely possession of their homes. CREDAI acknowledges the fact that the Indian real estate sector is expected to be a beneficiary of multiple reforms, foremost being Real Estate Regulation and Development Act, or RERA and GST. However, presently, the industry is trapped in a downward spiral of unfinished projects and tapering off of demand. At a time when developers are under immense pressure to deliver projects on time, financial institutions are cancelling disbursements after the loans have been sanctioned – leading to the non-adherence of timelines specified to home buyers.  CREDAI has consistently voiced out concerns and suggested recommendations on industry policies to make it a highly conducive environment for all stakeholders. The lack of adequate avenues of funding to developers will not only affect the developers and homebuyers but also the 250+ allied industries who are directly or indirectly dependent on Indian realty. Being the backbone of the Indian economy, appropriate Government support is needed to sustain the revival of the Indian Real Estate Industry. CREDAI submitted the below recommendations to the Prime Minister necessary for the sustainable growth of the Indian real estate industry,  -One time restructuring scheme for bank loans. -RBI should include a sub-limit of 10 per cent for affordable housing in overall target of lending 40 per cent to priority sector. This will help increase flow of credit to cheaper rate to affordable housing. -The creation of a ‘Stressed Asset Fund’, which will be directed to address ‘Last mile funding’ for completion of real estate projects. The fund will support the existing bank funding by providing only additional funding required to complete the project. CREDAI proposes it to be anchored by a government institution and can be set up as an Alternative Investment Fund (AIF) under SEBI regulations. CREDAI believes this mechanism will provide the necessary liquidity support to real estate developers in this grim hour of need.  -For viable projects, Prompt Corrective Action (PCA) norms should be relaxed, so that fundamentally such projects should not be stalled. While some steps have been taken by RBI, more measures are necessary. Jaxay Shah, President, CREDAI, shares his opinion: “CREDAI has consistently worked towards the growth and development of the entire real estate eco-system. We have maintained continuous dialogue with leading government authorities to tackle numerous industry and economic obstacles to spearhead an unceasing era of progress. Currently, the Indian real estate sector is at a stage where it requires the Government’s support more than ever before. We have submitted a bouquet of options to resolve this pertinent issue of lack of availability of funds for developers. We hope to work together with the concerned authorities and resolve the issue amicably.” Getamber Anand, Chairman, CREDAI National, comments “The Indian real estate sector contributes significantly to the growth of the Indian economy, being the second highest contributor to the country’s GDP. Therefore, it becomes highly imperative for the economy’s growth that Indian realty is on a sustainable path of development. At this critical juncture, we seek Government’s immediate intervention to provide adequate avenues of liquidity to developers to sustain the revival of Indian realty.”