Hyderabad: The first round of announcement of relief package for the SME and other sectors by finance minister Nirmala Sitharaman has given high hopes to other stressed sectors of the economy, particularly the real estate sector, which was already under pressure before the outbreak of Covid-19 pandemic. We are hopeful that the government will announce similar concessions, including concessional loans for the real estate sector on the lines of relief given to the SME sector, two real estate developers told ETV Bharat.
In the first round of announcement of stimulus package, Nirmala Sitharaman announced two reliefs for the real estate sector. She said that the Union government will write to States for easing the compliance burden by extending the validity of permits, licences and she also announce
“Relaxation in compliance burden is okay but we would like to see the complete package for the real estate sector. We are hopeful that more concrete measures will be announced soon,” said Manoj Gaur, managing director of Gaursons.
Delhi-NCR based ATS group also welcomed the relief package for the SME sector and sought similar relief for the real estate sector.
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“This is a morale booster for everybody. We hope that next announcement will cover other industries as well,” said Getamber Anand, Chairman and Managing Director of ATS Infrastructure.
In addition to easing the compliance burden, Nirmala Sitharaman also announced a Rs 30,000 crore investment scheme for NBFCs, Housing Finance Companies and Micro Financing Institutions.
She also announced expansion of the existing Rs 45,000 crore partial guarantee scheme for NBFCs. Both NBFCs and HFIs lend to real estate projects, so the real estate sector is expected to benefit from the first round of announcement but that is not enough as sector specific concrete measures are yet to be announced.
“As they have given liquidity to SMEs, real estate also needs liquidity. We are hoping for the loan facility as they (the government) have extended to the SME sector,” said Getamber Anand.
“Real Estate sector needs that,” Mr Anand told ETV Bharat.
Concessional loans and a moratorium on loan repayment seems to be on the minds of most of the real estate developers as they have seen slow growth, delayed projects and inventory buildup due to several reasons.
“The government should not only give concessional loans but they should also announce a moratorium on loan repayment on the lines of the SME sector,” Manoj Gaur told ETV Bharat.
He said the real estate sector has been saddled with a very high cost of interest rates vis-à-vis some other sectors of economy.
“We have been required to borrow on exorbitantly high interest rates, 15-18%, in some cases it’s 20% or more,” said Mr Manoj Gaur, adding that the loans to the real estate sector should be given at the MCLR (Marginal Cost of Funds Based Lending) plus one per cent.
New SME definition to help real estate developers
Manoj Gaur says that the changes announced by finance minister Nirmala Sitharaman in the definition of SMEs will benefit small real estate developers.
“It will benefit the small developers as they will qualify in the SME sector as the government has removed the distinction between the manufacturing and services companies in the new definition of SMEs,” he told ETV Bharat.
According to the new definition of SMEs, companies with the turnover of up to Rs 5 crores will qualify in the category of micro industries while for small and medium companies it will be Rs 50 crores and Rs 100 crores respectively.
Existing relief in compliance burden not enough
Manoj Gaur also points out that the relaxation from the compliance burden should be at least for a year against the six months period recommended by the Centre as the construction work had already suffered two months delay before the Covid outbreak due to the restrictions imposed by the National Green Tribunal.
“The restrictions imposed by the NGT were applicable till January this year, when we started to work from February, we have been hit by this lockdown announced in March,” Manoj Gaur told ETV Bharat.
(Article by Krishnanand Tripathi)
