Real estate hails finance minister's CLSS extension, but wants more stimuli to spur demand

Union finance minister Nirmala Sitharaman’s decision to extend the Centre’s Credit Linked Subsidy Scheme (CLSS) till March 31, 2021, could be good news for the housing sector.

"As a ripple effect of increased demand for affordable housing, the decision will positively push demand for raw materials like cement, steel, transport and other construction materials,” said Anuj Puri, chairman, Anarock Property Consultants. According to Anarock, 39 percent of 15.62 lakh under-construction homes are in the affordable segment, priced below Rs 40 lakh, which Puri said will stand to benefit the most.

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Sitharaman said the move to extend CLSS till March 31, 2021 could lead to investments of over Rs 70,000 crore in housing, new jobs, and benefit 2.5 lakh more middle-income families in FY 20 alone. She said that a total of 3.3 lakh families have benefited from the scheme up until now.

“While the government's expectation of 2.5 lakh families enrolling for the scheme within a year seems slightly ambitious, the extension by a year was much required and is bound to safeguard against possible demand disruption after the lockdown,” said Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.

However, what has pleased developers the most is the real possibility of enhanced cash flows by way of CLSS extension. “The extension of the CLSS scheme will bring in cash flows for real estate, thereby saving the affordable housing segment,” said Ashok Mohanani, chairman of EKTA World, “This in a larger perspective, will boost demand.”

The finance minister’s additional announcements surrounding interest subvention of 4 percent by way of CLSS for those with incomes of between Rs 6 and 12 lakh, and 3 percent for those with incomes between 12 and 18 lakh could also boost demand for housing.

“This spur in potential demand for housing units will result in cumulative demand for construction services, building materials, and finally translating into job creation,” said NAREDCO, president Niranjan Hiranandani.

However, there’s a lot more than needs to be done in terms of an overall economic stimulus for real estate revival, say some property consultants. “For housing demand to return, irrespective of the category, the economy must start growing at a stable rate to provide financial security,” said Shishir Baijal, chairman and managing director, Knight Frank India, “So, we will have to wait for the finance minister’s future announcements on infrastructure and other steps for demand augmentation."