‘Housing for All’ to be hit due to credit crunch

The liquidity squeeze in the real estate sector is adversely impacting new launches, putting in jeopardy the government’s target of ‘Housing for All’ by 2022.

According to real estate consultancy Liases Foras, the unsold inventory across 51 cities currently stand at 14 lakh units. The government requires 1.8 crore additional units in urban areas to meet its mission, which has hit a hurdle due to dwindling credit flow to the sector.

“With banks not financing construction, builders were predominantly dependent on NBFCs as customer advances were not enough. Now, with the liquidity crunch, a lot of developers, whose loans were sanctioned, are not getting disbursal and have deferred plans for new launches,” Pankaj Kapoor, MD, Liases Foras, told Business Line .

Government push

The government has been doling out incentives for home buyers, from lower interest rates to subvention schemes. Under the PM Awas Yojna (PMAY), households with an annual income of up to ₹18 lakh can avail ₹2.3 lakh upfront as subsidy for a home. Buyers are also eligible for income tax exemption on housing loans.

“But if the builder supply is reduced, the Government’s objective will not be met,” Kapoor said. As per Liases Foras, new launches in FY18 were already down nine per cent over the previous year. With over 20 per cent of sales in the affordable category now, any reduction in supply will impact the government target adversely.

Compounding effect

Niranjan Hiranandani, co-founder and MD of Hiranandani Group and President of Naredco, said new launches weresubdued for some quarters post demonetisation and implementation of RERA and GST. “The problem has been compounded by the IL&FS-led liquidity crisis,” he said.

“While the sector is clocking sales, the rate of absorption has come down as people are postponing purchase till a project is completed to save on GST (not applicable on houses which receive occupancy certificate). This disinclination to close transactions before OC is received is leading to deferment of cash inflow and further increasing the requirement of funds for the developers,” he added.

Vikas Oberoi, Chairman and MD, Oberoi Realty, said with this crisis, few developers will probably be able to buyland and turn it into ready-to-occupy apartments. “And if the supply is going to reduce due to financial mismanagement of developers or due to lack of funds from NBFCs, there will be a shortage. We are clearly seeing the market size increasing and supply reducing,” he added.