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Fiscal interventions set to do the heavy lifting

Posted On: 2020-05-13 20:29:03

Ramesh Nair, CEO and Country Head (India), JLL

This is the first set of special economic measures announced as a part of PM Modi's 'Self-Reliant India' movement announced last evening.

The fundamental of any economy is employment generation and the Government of India has made the right interventions by providing the requisite support to MSMEs. The revitalization of MSMEs will play a major role in the overall revival of the economy. This in turn is expected to have a positive impact on the consumer sentiment, which has an important bearing on the real estate sector.

The benefits will help boost MSMEs as they begin to restart operations and is expected to ease timely and adequate availability of raw materials including construction raw materials and inputs, which flow into the real estate sector.

The government of India has addressed the challenges of MSMEs through a combination of initiatives. These include setting up an emergency credit line of collateral free INR 3 lakh crore from banks & NBFCs, and a Fund of Funds with a corpus of INR 10,000 crore with an objective of infusing total INR 50,000 crore to provide equity funding for MSMEs with growth potential and viability. The government is also facilitating the provision of INR 20,000 crore subordinate debt to stressed MSMEs, and limiting competition for them from foreign companies.

These measures provided to MSMEs will also go a long way in protecting jobs and ensuring income continuity. This in turn will have a positive bearing for potential homebuyers especially in the affordable and mid segments.

The special liquidity scheme of INR 30,000 crore with government guarantee for buying investment grade debt paper and INR 45,000 crore under the partial credit guarantee scheme for the NBFCs/HFCs/MFIs will provide much needed liquidity for the sector. The easing of liquidity is likely to help the NBFCs and HFCs to support the real estate sector through restructuring of existing loans and resetting of repayment schedules.

The Central government's advisory to the state governments to invoke the 'force majeure' clause has come as the much-needed relief for real estate developers. This will now provide for a six-month suo-moto extension for project registration and completion of projects (with scope for a further three-month extension), which are due for expiry on and after 25th March. This will definitely benefit developers as the construction activity has been adversely hit due to the ongoing lockdown. This also gives elbowroom, as the sector gradually restarts its operations with the expected gradual ease in lockdown. It will aid in smoothening the operations as they will have to grapple with issues related to adequate availability of labor due to reverse migration and supply chain issues with respect to timely availability of key raw materials such as cement, steel, etc.

Source: Equity Bulls

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