To tackle the realty slowdown, the government has announced a stressed fund amounting Rs 20,000 crore to provide last mile funding to stressed assets will be created, but will that amount resolve the sector woes? Samir Jasuja, founder of Prop-Equity has done some number crunching and discussed the same.
The government has announced plans to set up a Rs 20,000 crore stress fund to revive real estate industry, while it is a step in the right direction real estate data and analytics platform PropEquity’s estimates the industry requires approximately Rs 90,000 crore to cure the housing sector of its ills.
To tackle the realty slowdown, the government has announced a stressed fund amounting Rs 20,000 crore to provide last-mile funding to stressed assets, but will that be enough to resolve the sector woes? Samir Jasuja, the founder of PropEquity, shared his views on the same.
“This problem that has got created is not because of the government. The government is being magnanimous enough to be able to solve this problem as much as they can and they are trying to allocate funds to be able to help out both the non-banking financial companies (NBFCs) and the developers,” Jasuja told CNBC-TV18.
“In the report, there are about 13.8 lakh units that have to get completed in the next two years out of which 4.4 lakh units already have been under stress. Most of them have gone into the National Company Law Tribunal (NCLT). Coming to the balance 9.4 lakh units that have to be completed – which are more than 60 percent completed – which are only affordable and mid-segment of private developers. It is very important for the government to be able to choose the right projects amongst them. Coming to the exact number, we have estimated Rs 800 a sq ft requirement of last-mile funding which is roughly about 20-25 percent of the overall construction cost multiplied by an average size of 1,500 sq ft, which is between 2 and 3 bedrooms, you come to a number of about 1,66,000 units can be completed with that kind of money and there are about 55 percent absorption under projects that will get completed. So roughly 91,000 consumers will be benefited out of the corpus of Rs 20,000 crore,” he added.
“Just providing the funds is not good enough. It is only one part of the problem. In this case, the amount that is being provided is also quite limited compared to the overall problem. I do sense that if the government chooses the projects wisely, it will be able to exhaust the fund. Many people have been talking about that the entire fund will not be utilised because most of the developers would have reached NCLT or would be non-performing assets (NPAs), so there would not be enough projects for them to fund. However, according to our data, there are a good 3 lakh units for the government to choose from and they can only help about 25-30 percent of them,” said Jasuja.