The Coronavirus pandemic had prompted the Government of India to adopt a strict nationwide lockdown. Barring scanty manufacturing and distribution of essential commodities, medical supplies, and utilities, this comprehensive lockdown completely stopped almost all other industrial and commercial activities nationwide.
Although the lockdown was necessary to arrest the speed of the spread of COVID-19 in India, it has hugely disrupted the economy which screeched to a grinding halt. The implications are going to be deep and manifold. To arrest any further slide of the economy, the government came out with a mega stimulus of Rs 20 lakh crore, 10 per cent of Indiaâ€™s GDP, touching various sectors of the economy.
The governmentâ€™s response is to provide relief to all stakeholders: banks and NBFCs, homebuyers, developers, and construction workers. Letâ€™s see how each section will benefit.
A Slew of Measures for the Homebuyers
The government announced a slew of measures to provide succour to the home buyers in this difficult time. A moratorium is announced when the homebuyers can postpone payment of home loan instalments for 3 months (further extended for another 3 months). Banks and NBFCs are empowered to implement this directive based on the need of the customers.
In addition to the above, RBI reduced theÂ Repo rate to a decadeâ€™s low of 4 per cent which is expected to be transmitted by the banks to substantially bring down the home loan interest rates.
PMAY CLSS Scheme is further extended till 31st March 2021 and this will help create demand for affordable housing and will lead to RsÂ 70,000 crore investment in the housing sector, Finance Minister said.
Furthermore, the government has postponed IT filing dates and reduced mandatory EPF deductions to provide additional benefits.
Liquidity Enhancement Steps to Help the Banks and NBFCs
RBI came out all guns blazing with the sole objective of increasing liquidity in the financial system in general and banks, housing finance companies (HFCs), and NBFCs in particular. RBI is already operating TLTROs (Targetted Long Term Repo Operations) from time to time to inject liquidity into the system. In addition, the government will launch Rs 30,000 crore Special Liquidity Scheme for NBFCs and HFCs, and Rs 45,000 crore Partial Credit Guarantee Scheme 2.0 for NBFCs.
It is expected that there will be no dearth of liquidity in the system and credit will flow quite smoothly to homebuyers, developers, and the raw material producers of real estate. Also, the change in classification period in NPAs from 90 days to 180 days would prove beneficial for developers and homebuyers in the current scenario.
Developers will Receive a Helping Hand
The real estate industry is a vital sector of the economy and many other industries depend on it. It is one of the largest generators of jobs. And jobs must be protected in this period of crisis.
All real estate projects registered under the Real Estate Regulatory Authority (RERA) expiring on or after March 25 will get a six-month extension as the lockdown to contain the COVID-19 pandemic stalled work. The regulators may further extend this up to three more months if needed. In essence, COVID-19 will be treated as force majeure.
Relaxation in project timelines under RERA Act will bring in a sigh of relief to the developers and safeguard the interest of homebuyers with the revised new timelines for their dream home deliverables. This will ensure homebuyersâ€™ trust in the project and grant breather to the developersâ€™ fraternity for coping up with backlogged work due to natural disaster delays.
Help at Hand to Restart Construction with Support to Workers
A salient feature of the mega stimulus package is the focus on the vulnerable sections of our society through Pradhan Mantri Garib Kalyan Package. 80 crore poor people will be given the benefit of 5 kg wheat or rice per person and 1 kg pulses per household free for the next 3 months. This will provide a huge palliative to the blue-collar workers.
Building and Construction Workers Welfare Fund will be allowed to provide relief to workers. Additionally, 24% of monthly wages will be credited to the PF accounts for the next three months for wage earners below Rs 15,000 per month in businesses having less than 100 workers. This will also help construction workers.
It is expected that the mega stimulus will help homebuyers as well as the real estate industry. Over time, real estate will go back to pre-COVID-19 days as the underlying demand is robust for affordable homes.