India's buildings sector to expand by 6.6% next year driven by fiscal support, govt policies on housing market: Fitch

  • Instances of stalled housing projects have been on the rise over the course of 2019, due to a credit crunch sparked by a series of defaults by NBFCs

  • Opportunities in the construction of affordable housing units will remain strong over the coming years, driven by PMAY initiative

  • To provide financial support to homebuyers, various complementary schemes, such as the credit-linked subsidy scheme, were introduced alongside PMAY

New Delhi: Fitch Solutions on Monday said it expects the country's residential and non-residential buildings sector to expand by 6.6 percent, in real terms, next year, driven by fiscal support and a continued focus on the provision of affordable housing in urban areas.

"Short-term expansion of India's building sector will be driven by a mixture of fiscal support and government policies supporting the housing market, as well as heightened activity within the logistics, retail and industrial buildings sectors," it said in a statement.

Long-term growth, on the other hand, will mainly be driven by country's massive population, which requires continued investments into residential building construction sector, the statement said.

 Indias buildings sector to expand by 6.6% next year driven by fiscal support, govt policies on housing market: Fitch

Representational image. Reuters

Instances of stalled housing projects have been on the rise over the course of 2019, due to a credit crunch sparked by a series of defaults by non-bank financial companies (NBFCs), resulting in a decreased access to funding for both developers and homebuyers.

In response, the government "approved a Rs 10,000 crore package in November 2019 aimed to aid stalled housing projects, with an additional Rs 15,000 crore to be contributed by state-run financial institutions."

With funds more readily available, it expects a portion of stalled housing projects to resume construction, and this will feed into its forecasts for India's buildings sector growth in the short term.

Opportunities in the construction of affordable housing units will remain strong over the coming years, driven by Prime Minister Narendra Modi's Pradhan Mantri Awas Yojana (Urban) initiative.

Introduced back in 2015, Pradhan Mantri Awas Yojana (PMAY) aims to provide affordable housing to all urban poor by 2022, targeting more than 4,000 towns handpicked by the government.

To provide financial support to homebuyers, various complementary schemes, such as the credit-linked subsidy scheme, were introduced alongside Pradhan Mantri Awas Yojana.

"Though PMAY(U) is expected to boost growth of the residential buildings sector, we believe the government is unlikely to achieve its goal within the stated time frame due to the continued growth of India's urban population, which creates a greater demand for affordable housing, as well as delays in land acquisition and construction," it said.

It further said that the "PMAY(U)-related construction is expected to carry on beyond 2022, contributing to growth of the residential buildings sector in the short to medium term".

On a separate note, there exists a considerable amount of unsold housing inventory, mostly medium to high-end luxury units in urban areas that will limit the growth potential of the high-end residential buildings sector, it noted.

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Updated Date: Dec 30, 2019 13:19:53 IST