The apex association of real estate developers Thursday sent an SOS to the Prime Minister's Office (PMO) saying housing and other projects were facing an acute liquidity crisis after financial institutions stopped disbursing sanctioned loan amounts to builders.
In its letter to the PMO, the Confederation of Real Estate Developers' Associations of India (CREDAI) has demanded a one-time restructuring of bank loans and creation of a 'stressed asset fund' for completion of real estate projects.
It sought Prime Minister Narendra Modi's intervention "to ease the credit freeze in the Indian real estate sector amidst the lack of availability of funds to developers for completion of real estate projects."
The crisis in the NBFC space came to light last month after IL&FS defaulted on some debt repayments.
"At a time when developers are under immense pressure to deliver projects on time, financial institutions are cancelling disbursements after the loans have been sanctioned - leading to the non-adherence of timelines specified to home buyers," CREDAI said in a statement.
The association said the real estate sector is expected to be a beneficiary of multiple reforms, foremost being the Real Estate Regulation and Development Act (RERA) and GST, but currently it is "trapped in a downward spiral of unfinished projects and tapering off of demand."
The lack of adequate avenues of funding to developers will not only affect the developers and homebuyers but also the 250+ allied industries which are directly or indirectly dependent on this sector.
In the letter, CREDAI has submitted many recommendations such as one-time restructuring scheme for bank loans and creation of a 'stressed asset fund' for 'last mile funding' to complete real estate projects.
"RBI should include a sub-limit of 10 per cent for Affordable Housing in overall target of lending 40 per cent to priority sector. This will help increase flow of credit to cheaper rate to Affordable Housing," CREDAI said.
For viable projects, it said that Prompt Corrective Action (PCA) norms should be relaxed so that such projects are not stalled.
Stating that real estate sector contributes significantly to the growth of the Indian economy, CREDAI Chairman Getamber Anand said: "At this critical juncture, we seek Government's immediate intervention to provide adequate avenues of liquidity to developers to sustain the revival of Indian realty."
CREDAI President Jaxay Shah said: "Currently, the Indian Real Estate sector is at a stage where it requires the Government's support more than ever before. We have submitted a bouquet of options to resolve this pertinent issue of lack of availability of funds for developers."Established in 1999, CREDAI is the apex body for private real estate developers in India, representing over 12,000 developers through 23 states and 203 city chapters across the country.