RS.25,000 CR - WILL I GET MY HOME NOW?

about 7 days ago
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“Will I get my home now?”

That’s the question which dogs every person’s mind whose housing project has been stalled, especially in Mumbai where there are scores of projects, redevelopment and new stuck in a quagmire of delays. Be it paucity of funds or legal hassles or regulatory delays, there are more housing projects unfinished than finished. So many people have given up their old and crumbling houses to builders, in the hope that he will deliver to them a new, swanky and modern home where they can now live comfortably. They have been getting a princely sum every month as rent too. But majority of such projects today stand incomplete with work halted or going on at a snails pace. Many are not gettig the promised rental income as the builder has raised his hands, citing no money.

Thus they all are asking whether their troubles will now finally come to an end with FM’s Rs.25,000 crore Alternate Investment Scheme (AIS).

Well, the hard truth is NO. Major of these small projects are not really going to benefit from the AIS. And the small builders working on redevelopment projects, well they most certainly will not benefit. Many in the industry say that it is once again the big builders and mid-sized ones which will get major portions of this sop. More importantly, it is not as though what got announced yesterday will start trickling down into the sector from tomorrow.  We know how such things work and by the time the AIS becomes operational, it could well be another six months from now; so we could optimistically hope for this money to actually getting to the incomplete projects by early FY21. Also there is the big question of how these “incomplete” projects will get screened; the Govt has said 70% incomplete so getting approval for that 70% will be a process in itself.

Realty analyst, Jefferies has put out a report saying that at best, this Rs.25,000 crore largesse will benefit 16% of the total stalled projects over a period of time. Also, in all things govt, we have seen that those with money power get more money – that is what we will see here too.

What could help the small builders is the indirect benefit – when stalled and incomplete projects take off, the demand which is at rock bottom currently will show signs of picking up. Once demand picks up, automatically prices will rise and the builders will once again see cash flow. This will have a multiplier effect on the psyche where people will feel that things are indeed getting better and suppressed demand will finally get released. And yes, when money comes to projects, it will ensure demand for cement and steel goes up and will generate employment too. So it is the indirect benefit which will help the sector revive.

This Rs.25,000 crore AIS is most certainly a good move and like all the other sops given earlier, it is only by next fiscal that we see the benefits coming in.

And regarding the question about getting the home? Well, that could still take some more time….the painful wait will continue for many till the “indirect benefit” factor kicks in.

The FM yesterday announced a Rs.25,000 crore AIS for the housing sector, mainly  for 1600 stalled projects. A quick run through:

  • AIS to provide priority debt financing for the completion of stalled housing projects in the affordable and middle-income housing sector.
  • Rs.25,000 crore to come from Govt, SBI and LIC.
  • AIF will be entrusted to a professional investment manager, SBICAP Ventures Ltd.
  • Projects eligible for this scheme – affordable an middle-income proejcts, when referenced by existing lender, are 70% complete, registered under RERA, projects with positive net worth ( cash coming in is more than cost outflow) and even those included in NCLT, labelled as NPA will be eligible.

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