The Indian economy came to a virtual standstill in the wake of the COVID-19 pandemic crisis and since then, the central government has faced a massive challenge to get things back on track. The calibrated efforts in terms of fiscal stimulus packages and re-generating demand for goods and services have been announced so far to address the bottom of the pyramid. Beyond, one of the largest fiscal stimulus packages to the tune of almost 10 percent of the country’s GDP announced, the government has also made an effort to infuse liquidity in the system through measures like a reduction in the key interest rates by the Reserve Bank of India.

The government also announced a series of reformatory measures which included opening up several key sectors like Defense, Space Technology, and Mining to bring in better transparency and encourage investments. However, the Indian economy is consumption-driven and resumption of purchase of houses will rekindle the real estate which in turn reboots about 300 industries with its rippling positive effect and lead to a generation of more than five crore jobs across the country. To achieve this, the real estate industry which is cratering even before a pandemic crisis needs handholding by the government. The sector is adversely affected by liquidity and now additional labour & raw material scarcity crisis.

Developers Initiatives

The real estate developers association, NAREDCO under the guidance of the ministry of housing has been taking initiatives to revive the demand in the sector. They have launched a one of its kind e-commerce platform- Housing For All to showcase almost 2.7 lakh ready to move in house in RERA registered projects at very affordable rates. It offers end to end solutions to the consumers.

Unlike other realty portals, here the developer too assures a complete refund which would instill the consumer confidence back in the market. The real estate sector needs immediate demand shock and unlocking the potential of unsold housing inventory is the immediate remedy.

Need Demand Booster

The industry has been pegging hopes from both central & state governments to announce market sweeteners like a slash in levies and taxes to uplift dampened consumer spirits. As the market is favourable for the discerning home buyers with low home loan interest rates, credit subsidy from the government, choice of units, price correction, rupee depreciation which lures domestic as well as NRI home buyers to Indian Real Estate. Also, with fall in an interest rate and volatility in the other investment instruments, the investments in housing generate comparatively better yields along with safety and security quotient.

The government has been taking steps to promote affordable housing and also taking steps to boost affordable rental housing schemes targeting the underprivileged segments of the society. The government now needs to open up the affordable rental housing scheme (ARHS) and offer incentives to developers who are actively involved in this segment

The housing minister has given the developers the assurance that 100 percent of foreign direct investment would be allowed in the affordable rental housing segment. The government has also assured that a lot of the vacant government houses that were constructed but not utilized would be used for the rental housing scheme.

There is also a need to allow 100 percent of foreign direct investment in completed real estate projects. At the moment around Rs 2 lakh crore of investments are stuck in unsold inventory, the money released can be directed into the construction of affordable and low-cost housing projects.

The government has a lot of land under its control like the salt pan lands where there are certain restrictions on construction activities. In the Mumbai Municipal Corporation limits, there are almost 650 acres of salt pan land. If the government opens up these land tracts for the construction of affordable houses, it would give a huge boost to the low-cost housing segment in Mumbai where there is an acute paucity of vacant land.

The government also needs to reduce the GST rates by at least 50 percent for a certain time period like six months to a year. This would instigate consumption boosting demand and would encourage people to spend, which is choked now amidst a cloud of uncertainties. There is a requirement of almost Rs 1.5 lakh crore for the developers to complete their stalled projects.

Last year, the government announced the setting up of the SWAMIH investment fund to the tune of Rs 25,000 crore for completion of construction of affordable and mid-income housing projects where they announced an infusion of Rs 10,000 crore on their own. There is a need to increase the corpus to at least 1.5 lakh from the present Rs 25,000 crore. The government need not worry about the money; it will come from financial institutions.

India needs to focus on its burgeoning need to attract investment into the infrastructure development sector to achieve its well –laid ambitious target of becoming a $5trillion economy by the year 2024. Infrastructure is a crucial driver of economic growth which not only generates employment growth but also has the capacity to increase consumption and thus give a boost to the reeling economy.

Infrastructure financing in India needs an alternative funding mechanism with all infrastructure banks converted into commercial banks. Firstly it needs to encourage privatisation in the infrastructure sector and there is a need to construct a financial bond market that runs for 5 years and moves assets into a 20-30 year bond / Inveits to ensure constant capital flows. The government can also consider to mobilize funds through disinvesting stake sale of privatise profit-making state-run companies

The industry has also been having discussions with the Reserve Bank of India to cast a one-time rollover for all stressed debts similar to the year 2008 in the Lehman crisis. This step will help banks to tide over the crisis. We expect a similar solution to address the issues faced by the liquidity strapped real estate sector. If it doesn’t happen then pretty soon, there would be a huge rise in the number of defaults and NPAs.

The author is the National President of the Industry body, NAREDCO, and ASSOCHAM