How Real Estate Sector Will Benefit From Rs.20 Lakh Crore Relief Package?

• @kw
• 28 May 2020

Prime Minister Modi announced on 12th may, 2020, a special relief package of Rs.20 Lakh Crore to stir up the economy to counter the effect of Corona virus Pandemic in our country. This package is whooping 10% of country’s GDP which Rs.204 lakh Crore at the moment. This includes the earlier package of Rs.1.7 lakh crore announced in March 2020 along with other measures launched by the Reserve Bank of India, including liquidity measures and interest rate cuts. This announcement is to keep the present government commitment to spur economic growth and make India self reliant.

Under RERA, providing an extension of 6 months timeline for completing real estate projects provided significant relief to real estate developers. All construction activities had been halted across the country due to COVID-19 pandemic. Many sites laborers have gone back to their villages and re-starting the construction activities in full swing is going to be slower process. However the 6-months leeway seems to be quite reasonable step by RERA.

Special Liquidity scheme by infusing Rs.30,000 crore in NBFC, HFC’s and micro-finance companies with help of debt papers in addition to 20% emergency credit line to business will have its positive impact on real estate sector and bring some relief to the liquidity crunch in real estate sector.NBFC and HFC together contribute around 56% of the total lending to real estate in India.

Self-reliant India is the latest slogan of Shri Narendra Modi to fight and win the war against this pandemic. It is expected that the real estate sector in India will be more reliant through indigenous sourcing of raw materials and by manufacturing of construction equipment by Indian companies under make in India drive. Self- reliant India will see generation of employment opportunity for the masses, which will boost the economy. This will give rise to increase in demand for housing projects and commercial spaces. 

Till now there has not been any significant indication of much direct infusion of fund into real estate sector but the reliefs announced in other sectors will have its positive impact on real estate sector. 25% TDS reduction will have a direct benefit to the home buyers as it will leave additional liquidity in their hand. MSME’s have been provided with significant benefits such as provision for collateral free automatic loan for MSME’s worth Rs.3 Lakh crore to as many as 45 lakh units for four years. This will curtail job losses and could indirectly benefit affordable housing. However, the real estate sector is still hoping for further liquidity infusion. The real estate sector is hoping to get some fiscal relief to this second largest employment generating sector in the country.