Will liquidity infusion in HFCs help revive the realty sector?3 min read . Updated: 01 Sep 2019, 11:46 PM IST
- Industry representatives have been flagging off the alarming issues which have compelled the government machinery to act upon with fiscal corrective measures due for a long time
- The liquidity infusion amount to HFCs has been recently increased to ₹30,000 crore. HFCs can use this facility to create individual housing loan portfolios in the affordable housing segment
Last month, housing finance companies (HFCs) that have been facing a crisis for the last one year got substantial liquidity boosters. In the first week of August, the National Housing Bank (NHB) announced the infusion of ₹10,000 crore in HFCs. Later in the month, finance minister Nirmala Sitharaman announced additional liquidity support of ₹20,000 crore for HFCs by NHB, increasing the total NHB infusion to ₹30,000 crore. All this is over and above other funding schemes extended to HFCs by the government. Ashwini Kumar Sharma asks experts how far will this help the real estate sector
Govt needs to monitor fund flow to revive realty sector
—Shishir Baijal, chairman and managing director, Knight Frank India
The prolonged slowdown in the real estate sector was exacerbated by the NBFC (non-banking finance company) crisis that started to unfold after the IL&FS debt debacle. While the contagion of slow consumer demand is evident on many industries now, the real estate sector has been facing the twin challenges of weak housing demand and troubled supply side, and both require government attention.
Though a series of measures, more specifically for the affordable housing segment, have been undertaken, some well-defined initiatives on the supply side, particularly for liquidity issues HFCs are facing, are needed. System-wide liquidity remains adequate, but banks and NBFCs have steered clear from lending to real estate as they have amassed huge NPAs (non-performing assets), thanks to stalled realty projects and poor demand. The trust deficit in lending to stalled and under-construction projects have created bigger problems. If the government monitors such fund flow achieving its goal, the sector will revive eventually.
Fund infusion in HFCs by govt is likely to ease liquidity crunch
—Niranjan Hiranandani, national president, NAREDCO
Government has acknowledged the fact that the Indian real estate sector is going through a liquidity crisis. Industry representatives have been flagging off the alarming issues which have compelled the government machinery to act upon with fiscal corrective measures due for a long time. In order to meet the widening funding gap, additional funds have been granted to HFCs.
The fund infusion in HFCs will definitely ease the liquidity crunch, and stoke up housing demand. Upfront release of funds for recapitalization of public sector banks for extending funds to HFCs and NBFCs, which had been announced in the budget, will re-open the choked funding funnel. This, in turn, should increase demand for homes along with rise in fresh home loans. This will help rebuild the confidence of investors.
The fresh fiscal booster demonstrates responsiveness in executing an action plan to kickstart India’s cooling down economic growth and will certainly create a positive impact on industries grappling with funding issues.
The move will directly benefit affordable home segment
—Shubham Jain, senior vice-president and group head, corporate ratings, ICRA
The liquidity infusion amount to HFCs has been recently increased to ₹30,000 crore. HFCs can use this facility to create individual housing loan portfolios in the affordable housing segment. Hence, this liquidity facility is expected to directly benefit the affordable housing segment through better credit availability.
Moreover, the facility will act as a confidence boosting measure and enable HFCs to shore up their liquidity during a time when availability of financing has become challenging. While there are no provisions in the facility to directly support wholesale lending to real estate developers by HFCs, the facility is expected to ease overall liquidity in the sector. Over time, the benefits may flow into wider segments through increased investor confidence.
This step is also expected to provide support to the Pradhan Mantri Awas Yojana (PMAY), which aims to provide housing for all by 2022 and particularly for PMAY-urban, where the disbursements and house completions are lagging as against the targets.
Reforms will expedite the growth of real estate industry
—Satish Magar, president, CREDAI National
The additional liquidity support to be provided by NHB will help the real estate sector which has been facing a demand slowdown and cash crunch for quite some time.
The support is a positive sign because earlier when HFCs exited (stopped funding real estate projects), the sector faced a lot of liquidity crunch. This also led to an increase in interest rates for loans.
With the government infusing liquidity, nationalized banks will start funding the sector as well.
NBFCs have already started receiving liquidity from banks once again and are extending loans to homebuyers.
The increase in funding will make a difference because we have already started moving in a positive direction, leading to the revival of the industry.
The recent steps undertaken by the finance ministry to minimize the liquidity concerns in the financial sector is a much anticipated move for realising the dream of the $5 trillion economy.
These reforms will help in expediting the sector’s growth.