Government Stays Determined to Revive the Housing Sector

As of today, the real estate sector is burdened with stalled projects, unsold properties, and substantial debt. The real estate industry is facing a slowdown in demand because of several reasons such as tight liquidity condition, defaults by several builders, and high prices.

The industry anticipates the government to take up necessary initiatives to address their problems around demand slowdown, liquidity crunch, and delayed projects. 

A slew of effective measures meant for homebuyers is in progress to revive the Indian housing industry. A comprehensive package is being worked upon concerning the housing sector.

Nirmala Sitharaman, the Finance Minister, has also done numerous discussions with the housing sector as well as the urban affairs ministry representatives with regards to initiatives to be undertaken to uplift the real estate wing.

The government plans to introduce a fund as part of a package which will act as a guarantee for individuals who otherwise do not qualify for a home loan. This fund will not only provide a guarantee for housing loans but it will also boost lending since banks will be comforted with a guarantee.

With the introduction of a fund, the eligibility of borrowers will increase, and their credit rating will improve too. The government plans to offer borrowers with a guarantee from the proposed fund by charging a small fee. The proposed fund aims to support borrowers who do not have a steady income, a good credit rating and due to which they are unable to qualify for a bank loan.

RBI has composed a panel which has suggested to set up an intermediary under the National Housing Bank (NHB) which will be sponsored by the government. This intermediary will focus on developing securitisation in the home loan market.

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The panel also suggested standardising the home loan documents. Also, the Committee on Development of Housing Finance Securitisation Market suggested to exempt stamp duty with regards to mortgage-backed securitisation.

Other measures which are in consideration include:

• Creation of a task force specifically for real estate
• Simplifying the norms related to interest subvention
• New rental housing policies
• Increase in the housing category cap
• Reduction in the processing time with regards to housing applications which come under the partial guarantee scheme

The current slowdown in the real estate sector is a result of multiple factors. The consumption sentiment amongst people has been deeply affected. People will not invest in buying a property when renting a property is more cost-effective for them.

People are hesitating to get into a long-term financial commitment considering the slowdown in the economy wherein career growth and job security are in doubt. Lowering interest rates or a mere GST rate reduction might not be the only solution to revive the real estate industry.

People might decide to invest in a property only when they feel buying a property will be a better choice versus renting one. Properties will need to get more affordable in terms of taxation as well as price points.

Developers will have to regain trust amongst people when it comes to under-construction projects. Also, investment returns with regards to residential properties have to improve. 

The government is determined to strengthen the real estate sector since it has multiple effects on several other areas such as steel and cement in addition to generating employment. For both RBI as well as the government, easing finances for potential buyers and reviving the housing sector is the prime agenda.