India Ratings suggest the imbalance of Demand-Supply may worsen with the Government’s Rs 25,000 crores fund.

India Ratings and Research said in their reports that the home buyers will be benefited that are awaiting possession of their homes, by the India government’s decision to set up a Rs 25,000 crores fund to provide a priority for debt financing to complete stalled housing projects. The Fund would provide an alternative outlet to net-worth-positive projects stalled because of liquidity/credit availability issues. Many non-banking financial firms and housing financing companies will benefit from reviving viable projects listed as non-performing assets (NPAs).

Nevertheless, the imbalance in demand-supply is likely to worsen with stalled projects on the move, and pricing pressures in the sector may become more pronounced if overall housing demand is not recovering. In addition, the market expansion for Grade I players could also continue as supply from non-Grade I players are being made available. Under India Ratings and Research (Fitch Group) classification, Grade I developers are the one who has a reputed brand name, significant market shares, solid executive skills, solid financial flexibility and regulatory compliance with strong balance sheets.

Modification in eligibility criteria to support distressed projects.

The latest guidelines also expanded the scope of projects under this special window which can benefit from the funding. It will include housing units of up to Rs 2 crores (Mumbai – Rs 2 crores; other 7 cities – Rs 1.5 crores; and the rest of the cities – Rs 1 crore) and projects graded as NPA or are subject to NCLT (National Company Law Tribunal) proceedings with a net worth positive (cash flows greater than the project cost). In comparison to the previous announcement in September 2019, which only limited funding to non-NPA and non-NCLT projects, the new measure will support fundamentally viable yet struggling projects due to slow sales and/or the lack of availability of credit.