India’s stimulus promises to flush cash into the financial sector ⁠— some of it may reach real estate too

• Real estate sectors in India believe there will be a number of benefits that the sector will enjoy apart from the extension of registration and completion deadlines.
• The government announced ₹3 lakh crore collateral-free automatic loans for businesses, including MSMEs which could encourage potential home buyers in their purchase decision.
• Moreover, real estate firms will find it easier to get loans from NBFCs and HFCs.

Finance Minister Nirmala Sitharaman announced that the Indian government will make space ₹3 lakh crore ($40 billion) collateral-free automatic loans for businesses, including micro, small, and medium enterprises (MSME).

“The government will buy investment-grade (not high-quality) debt of non-banking finance companies to the tune of ₹30,000 crore,” Sitharaman said. It will be a special liquidity scheme, fully guaranteed by the government, that will keep them afloat and it will benefit housing sector, she explained.

The government will also expand the scope of an existing partial credit guarantee scheme with an outlay of ₹45,000 crore. The government will bear the the first 20% loss on unpaid debt (AA-rated or below). Simply put, if some borrower (with the said rating) fails to repay the loan, the government will bear a fifth of that loss.

Aside from being a much-needed relief for the stressed financial sector, there will be an indirect benefit for sectors like real estate.

NBFCs and HFCs together contribute almost 56% of total lending to real estate in India currently, says Anarock research. “There is nearly ₹7.8 Lakh Crore with the banks at the present moment, that has been parked with the RBI at moment and it’s high time that, that amount is moved from the RBI and Banks to percolate liquidity in the economy,” Amit Modi, Director ABA Corp & President Elect CREDAI Western UP said.

There is more than cash boost for real estate

Finance Minister Nirmala Sitharaman on May 13 extended the registration and completion timeline by 6 months for all RERA projects that expired on or after March 25.

“Urban development ministry will issue advisory to states/ UTs so that Covid-19 period event be treated as a force majeure. They can treat it as an act of god. Extension of registration and completion date certificates may be extended dates by six months (expiry as of March 25, 2020),” Sitharaman said in a press conference.


The Indian government might extend this for another 3 months if need be. "These measures will de-stress real estate developers and ensure completion of projects so that homebuyers are able to get delivery of their booked houses with new timelines," Sitharaman said.

The real estate sector in India was in a lot of trouble even before COVID-19 struck. “This is a big move that will destress developers significantly, since construction activity has been halted all across the country. Homebuyers’ wait for their homes will get extended by this move, but this was in any case inevitable,” said Anuj Puri, from Anarock.

According to Ram Raheja, Director at S Raheja Realty, “these steps will help ease the liquidity concerns for the real estate sector as the strengthening of the NBFCs to lend will in turn enable liquidity flow in the ecosystem.”.

See also:

Deadlines for tax returns deferred⁠— and other tax reliefs announced by Nirmala Sithraman
Finance Minister Nirmala Sitharaman reveals the details of Modi's ₹20 lakh crore stimulus package