Real estate body CREDAI
Real estate body CREDAI has written an open letter to the Prime Minister seeking immediate measures from the government to help the real estate sector stay afloat. The industry body said that it has done its bit to mitigate the plight of over five crore labourers in the sector by providing food and shelter. Although the loan moratorium may be helpful for the sector in the long run, the sector requires a one-time loan restructuring scheme as allowed by the RBI in 2008 amid the global financial crisis. Since real estate was already reeling under a cyclical downturn before COVID-19, such restructuring needs to be allowed for all accounts which were standard as on 31.12.2019. CREDAI further said that the Centre should direct all banks, non-banking finance companies (NBFC) and housing finance companies (HFC) to institute a scheme to permit additional credit equal to 20 per cent of the existing real estate project related advances, at the MCLR with no additional security. It also suggested that government guarantees can also be extended for such credit, if need be. It also requested that the penal interest charged by banks and financial institutions be suspended for a period of one year or until the pandemic abates. Alleging sudden increase in cement and steel prices by the producers, CREDAI said that controlling prices of the raw materials is highly essential for construction activities to start. Across various states, there has been an increase of Rs 100-250 per bag of cement and about Rs 2,000-Rs 2,500 per metric ton of steel. Actual disbursements from the Alternate Investment Fund (AIF) – Special Window for Affordable and Mid-Income Housing of Rs 25,000 crore has been minimal, although the fund has achieved its first closing at Rs 10,500 crore very quickly. The chief constraint in the fund is the rigidity in its mandate, wherein the existing lender (Banks/NBFC‘s/HFC‘s/) is not being accommodated at all. Secondly, AIF expects a return of about 12-15 per cent on its investments in projects, which is very high given the fact that the projects in the ambit of the fund are stalled projects. This high return on investment leads to an increase in project cost, which eventually passes on to the already aggrieved home buyer, said CREDAI.
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