Nirmala Sitharaman's mega housing push of Rs 10,000-cr special window for stuck projects, relaxed ECB rules hits all right notes

The key highlight of Finance Minister Nirmala Sitharaman’s presser on Saturday is the announcement that the government will set up a Rs10,000 crore special window to extend funding to incomplete housing projects that are in good shape.

File image of Finance Minister Nirmala Sitharaman. PTI

Announcing the measure, Sitharaman said the government will contribute Rs 10,000 crore for the special window and roughly the same amount is expected from outside investors. "This window will help in completion of affordable and middle income housing projects. The fund will be managed by professionals," the finance minister added.

This step is positive at a time demand in the real estate sector is sluggish and the housing sector doesn’t look good in the backdrop of weak consumer sentiments. But a few things are crucial here: One, how soon will the fund be set up and what is the criterion for availability. Details need to be seen.

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Two, what follow-up action will the government take to boost housing demand. The announcement of a Rs 10, 000 crore fund makes the intent clear; what is required is to follow up action.

Merely setting up a fund for stuck housing loans won't help. About 5.5 lakh housing units are stuck or delayed in the top seven cities alone which would be much higher if we consider all cities and towns, according to estimates. The government needs to follow-up with tax cuts and incentives for the cement industry, too which is crucial and also make sure interest rates are passed on by banks to end-borrower.

The special window to provide last-mile funding for non-NPA, non-NCLT housing projects are net-worth positive, but won't help those home-buyers whose projects are now facing National Company Law Tribunal (NCLT) proceedings. The government has also said External Commercial borrowings (ECB) guidelines will be relaxed to help real estate developers obtain overseas funds. ECB guidelines will be relaxed to facilitate the financing of homebuyers who are eligible for it under the Pradhan Mantri Awas Yojna, in consultation with the central bank, Sitharaman said in the presser, adding that government employees will be given incentives for buying houses. This, too, will boost sentiment.

The other major announcement—incentives on exports are more incremental in nature but are nevertheless steps that will add to positive sentiments. Sitharaman spoke about a new scheme—Remission of Duties or Taxes on Export Product (RoDTEP)—to incentivise exporters at an estimated cost of Rs 50,000 crore to the exchequer.

A fully automated electronic refund route for input tax credits (ITC) in GST will be launched by month-end for quick refunds, announced Sitharaman. Having said that, more steps are needed from the government to address the ongoing economic impasse; the auto sector is in need of urgent help and this should ideally come in the form of GST(goods and service tax) rate cuts on automobile and components. The government needs to unlock money stuck in public sector unit (PSU) entities by giving up stake to raise funds.

The manufacturing sector requires much more than mega shopping festivals. Sitharaman has expressed hopes of growth revival post the disappointing GDP numbers in the June quarter. But, it would be illogical to expect a growth recovery unless sector-related problems are addressed and all solutions help in the infusion of fresh money. It will be important for the government to continue to step up spending on infra-related projects to generate more jobs and get back the momentum back.

At a time when the economy is going through a tough phase, the governments' constant engagement with investors almost on a weekly basis sends a good signal. It tells the outside world that the problem is acknowledged and efforts are on to fix it.