India’s Special Real Estate Fund Fails To Address ‘Crucial Concerns’, Says Industry

While the real estate fund for affordable housing is a step is in right direction, it fails to address stress that lies elsewhere.

A file photo of under-construction projects in Noida, Delhi NCR. (Photographer: Anindito Mukherjee/Bloomberg)
A file photo of under-construction projects in Noida, Delhi NCR. (Photographer: Anindito Mukherjee/Bloomberg)

The government’s sops to boost middle-income and affordable housing projects in the country “fail to address all crucial concerns”, stakeholders in India’s real estate sector told BloombergQuint, even as they acknowledged that the “step is in right direction”.

The stress lies in the mid to upper end of the real-estate market, said Gulam Zia, executive director at Knight Frank India. “Lower-end housing and affordable housing has been receiving a lot of incentives for the last 2-2.5 years either through Pradhan Mantri Awas Yojana or better Goods and Services Tax rates.”

The industry has been “surviving” on these incentives but the distress lies in the luxury housing segment, he said. “Whatever that is done is great. However, it’s not going to be sufficient because the stress lies elsewhere. Not so much in affordable and mid-income housing."

On Saturday, Finance Minister Nirmala Sitharaman announced the government’s plan to create a special fund to provide financing to many stalled housing projects. The government will contribute Rs 10,000 crore to the real estate fund, and expects a similar-sized contribution from external entities, like Life Insurance Corporation of India, banks and sovereign funds.

A developer, however, needs to satisfy certain conditions to be eligible for the government real estate fund:

  • The real estate projects have to be at least 60 percent complete.
  • Projects should have positive net worth, not classified as NPA and not under NCLT.
  • Projects should be in the affordable and middle-income category.

The plan will create additional demand but that may not be enough, said Niranjan Hiranandani, co-founder and managing director of Hiranandani Group—a Mumbai-based developer. “It [the non-NPA and non-NCLT condition] means the benefit will not be available to stalled projects, including Amrapali and Unitech in the National Capital Region.”

Not a single building in Mumbai is going to be benefited under the stress fund as they all exceed the Rs 45-70 lakh (cost) threshold
Niranjan Hiranandani, MD of Hiranandani Group

Also, there was a lot of ambiguity in the announcement, according to Hiranandani. There could be hurdles in eligibility for developers as they usually construct one-, two- and three-bedroom and luxury apartments, all under one single project, which may lead to the violation of the “affordable housing clause”.

Irfan Razack, chairman and managing director of Prestige Group, said projects that have gone into NCLT and have NPA problems need help due to liquidity crunch. “This [NPA-ridden] needs to be addressed separately to see the stuck projects get completed once for all.”

Here’s what brokerages have to say about the government’s plan to boost the real estate sector:


  • The government’s follow-up measures (for real-estate and exports) unlikely to give big economic push.
  • Demand improvement measures for real estate have been lacking and that is a source of disappointment.
  • The government continued to refrain from any significant fiscal support to the economy.
  • The upcoming GST Council meeting on Sept. 20 will gain importance.

Goldman Sachs

  • No specific steps announced to boost new housing demand.
  • Markets are likely to be disappointed given heightened expectations.

Morgan Stanley

  • Near-term impact of this measure is likely to be limited.
  • If executed well, the measure could help both homebuyers and lenders in medium term.
  • The quantum of the fund is probably insufficient relative to the requirements of the sector.
  • Limited scope as it leaves out high-income category projects and projects laden with bad loans and undergoing NCLT proceedings.