Real estate players seek more from govt, stocks fall despite sops

Proposed fund targets affordable & mid-level projects that are 60% complete, but with riders

The real estate industry is not happy with the measures announced by the government to revive the market. The proposed fund, primarily targeted at affordable and mid-level housing projects that are 60 per cent complete, has left out majority of the pending projects.
 
After Saturday’s announcement, the stock market reacted negatively on Monday. The realty index at the BSE closed 0.84 per cent lower than the previous close on Friday. Seventy per cent of the stocks in the index — DLF, Omaxe, Sobha, Prestige Oberoi Realty and Godrej Properties, among others — ended in the red.
 
According to Edelweiss Professional Investor Research, no respite has been given to projects in the National Capital Region (NCR) that houses majority of the stressed projects. This is because most of them are already in the National Company Law Tribunal (NCLT).

 

Edelweiss said no steps were announced for relief of stressed projects in the premium and luxury segment. “Mumbai and Delhi have the highest number of such projects and will continue to be under pressure,” it said.
 
According to Satish Magar, president, Confederation of Real Estate Developers Association of India (CREDAI), projects that are stuck before reaching 60 per cent completion are much larger in number. The proposed fund, which leaves them out of consideration, will thus not solve the fund crunch faced by majority of the developers.
 
According to Kotak Institutional Equities Research’s estimates, the Rs 20,000 crore proposed fund can facilitate completion of as many as 250,000 homes that are already 60 per cent complete.

 
It said real estate booster has limited implications for listed real estate stocks. “Listed real estate stocks have had lesser concerns on leverage and do not have offerings that meet the affordable housing criterion for government incentives. The Street was hopeful that the economic booster would help in reducing purchase cost (through tax incentives) for the premium segment of housing, or address concerns of stressed projects that have been stranded for lack of funding,” it said.
 
Data from PropEquity shows that close to a million units in the mid and affordable segment are due for completion by December 2021.

 
Moreover, over 440,000 mid and affordable housing units across the country are completely stalled. It estimates that in total, 740,000 units are either stuck or delayed, which would require Rs 90,000 crore for completion. This is much higher than the government’s proposed Rs 20,000 crore fund.
 
Further, 174,000 premium and luxury units across top seven cities are stuck, Anarock Consultants said. Projects in NCR-Delhi lead the pack with about 118,000 stalled units that are in the non-affordable category.
 
They are facing a bleak future, said Magar. “Most of these are in NCLT and not in Real Estate (Regulation and Development) Act (RERA), which further complicates the process. The initiatives will not address any of them,” he said.

 
According to Manoj Gaur, chairman of affordable housing committee, CREDAI, projects that are stuck at an early stage are the ones that require support rather the ones that are already 60 per cent complete.
 
Industry stakeholders further said that the government’s measures to boost demand are inadequate. “While Rs 4 trillion worth of projects are stuck or delayed and over 100 developers are in NCLT, the measures are too little,” said an executive from a major developer.
 
Edelweiss said demand creation should be the top priority right now to revive the housing sector and any concrete steps in that direction are missing.

 
CREDAI and other industry stakeholders are planning to make representations to the finance ministry with a litany of demands. Easing the liquidity situation for developers and raising the limit (by area and/or price) for affordable houses are its key demands. Moreover, to boost demand, it plans to seek lower interest rate for buyers.


Dismal State
 

• 740,000 housing units delayed in the affordable and mid-segment
• 174,000 premium and luxury units stalled in top seven cities
• Rs 90,000 cr required to finish delayed mid-level, affordable units
• Rs 20,000 cr proposed fund may complete only 250,000 affordable units that are 60% complete
• 118,000 stalled units in Delhi-NCR alone, most of them in NCLT or NPA
• Rs 4.5 trn is the estimated value of all the stalled and delayed projects