The Indian finance minister’s latest round of liquidity infusions into the Indian housing sector is the third such intervention by the government across multiple industries within a short span of time. A special window of Rs100 billion has been created as the final leg of funding for housing projects in the affordable and middle-income segments.
An additional 100 billion rupees would be contributed by investors like LIC, Development Finance Institution (DFI) and Sovereign Wealth Funds.
Other significant measures include relaxation of guidelines for buying affordable housing by foreign buyers and lowering of interest rate on housing building advances. This comes on the backdrop of the earlier liquidity support to NBFCs (non-banking financial companies) and HFCs (housing finance companies), announced by the National Housing Board (NHB) of Rs300 billion.
Around 1.74 million homes stuck in various stages across India (as per Anarock research) will benefit from this.
Non-resident Indians (NRIs) will certainly benefit from these measures as more affordable and mid-income housing options will become available over the short-to-medium term. Market sentiment will move northward once projects get completed as per schedule.
As per Anarock data, more than 55 per cent of property purchases by NRIs in this financial year have been in the affordable (sub Rs5 million) and mid-income (between Rs50 million to Rs100 million) categories — in short, a hefty percentage of NRI homebuyers have reason to cheer.
This will also lead to better job creation and improve the unemployment scenario in the Indian housing sector, leading to better macroeconomic fundamentals. While the bleak employment scenario affects the overall demand for housing, non-resident Indians have no such concerns and also enjoy higher disposable income.
Apart from these, the other incentives are:
Relaxation of guidelines for External Commercial Borrowings (ECB) to facilitate financing for home buyers, eligible under PMAY. This will go a long way in helping developers to get overseas funding.
Interest rates on housing building advances have been reduced for government employees, who form a major component of demand for housing.
In general, NRI property buyers and investors have had lots of reason to feel upbeat in the last few months with the government’s various steps to improve the overall investment scenario in India. Some of the initiatives directly impact NRIs — such as the merging of NRI portfolio Investment Scheme Route with the Foreign Portfolio Investment Route, and the fact that foreign portfolio investors (FPI) can now invest in listed debt securities issued by Infrastructure Investment Trusts and Real Estate Investment Trusts.
Other measures like pumping additional liquidity into the housing sector, along with taxation benefits and, more recently, setting up the last mile fund to kick-start stuck housing projects will improve the overall investment viability of real estate.
Shajai Jacob is CEO — GCC at Anarock Property Consultants.