India’s real estate sector, which is under tremendous stress due to a consumption slowdown and unsold inventories, has welcomed announcements by the government aimed at addressing the problems, but many feel the measures were not enough to help the industry get through the current crisis.

Finance Minister Nirmala Sitharaman on Saturday announced a slew of measures to boost sagging exports and a stressed real estate sector. These measures will cost the government about 600 billion rupees (US$8.4 billion). India recently recorded gross domestic growth of 5%, the lowest in six years.

For the beleaguered housing sector, the government will set up a fund to provide credit to under-construction homes which have not gone into the insolvency process. The government will provide 100 billion rupees (US$1.41 billion), while an equal amount will be provided by investors.

This funding will be provided for housing projects in the affordable and middle-income segment, where each unit does not cost more than 4.5 million rupees ($63,351). However, real estate sector officials claim this will have minimal impact.

Niranjan Hiranandani, the founder and Managing Director of leading realty firm Hiranandani Group, said: “There is a need to change the definition of ‘affordable housing’ and remove the price-cap of 4.5 million rupees while defining ‘affordable housing’ and focus on project size.

“I do not understand the logic why someone would think that 4.5 million rupees is a suitable benchmark for affordable housing, when it makes no sense for projects in metro cities like Delhi, Mumbai and Chennai,” he told the Financial Express.

Satish Magar, president of the Confederation of Real Estate Developers Association of India, told the daily that the problem with funding was with projects that are stressed and dragged into the National Company Law Tribunal (NCLT). These have been left out of the scope of announcements. Also, by the time the fund is set up, the stress would have spread further.

He pointed out that many real estate projects go into insolvency after the stoppage of funding due to a liquidity crisis in the shadow banks.

Real estate players face the twin challenges of a rise in borrowing costs from sources other than the shadow banking sector and a slump
in apartment sales. This lands many of them in debt and some even face insolvency.

According to property consultants ANAROCK, more than 550,000 units are stuck or delayed in the top seven cities alone, and the figure which would be much higher if all cities and towns were taken into account.

Many property developers are facing the anger of home buyers over inordinate delays in projects. Recently three leading property developers – Unitech, Amrapali and Jaypee – were taken to court by homebuyers over the issue.