Alternative funding models are a need of the hour to Boost Real Estate

The real estate sector of India is going through tough times, with the industry experiencing a buildup of stressed assets in 2019, suppressed liquidity and halted projects due to irregularities. The developers are running short on funds forcing them to put construction on hold and project deliveries getting delayed. It is estimated that 5,60,000 homes worth around INR 4.5 trillion are stalled across the top seven cities in the country.

To mitigate the current challenges, recently the central government has announced a relief fund of INR 25,000 crore for the real estate industry to restart work in the projects that have come to a standstill. Although the goal is to revive the real estate industry by infusing fresh capital into it, the amount allocated will not be able to cover the shortfall. Moreover, since this fund will primarily be focused on leveraging affordable and mid-income housing projects, a significant number of projects will not get a boost from this measure. This will pose a major roadblock for markets such as Delhi-NCR and MMR which are experiencing a significant slowdown.

Further adding to the issue is the fact that demand is pvioting from under-construction units to read to move projects which is hampering the much-needed cash flow for developers.

In addition to fiscal intervention,  global investors are needed to recapitalize the real estate sector in India in order to put it back on track. Through the conception of multi-party collaborations between advisories, developers and investors, newer avenues of funding can be put into effect that will jump-start the stuck projects. It also offers a profitable opportunity due to the potential of such undervalued assets to rope in significant ROI. Attracted by this prospect, HNIs, NBFCs & Venture Capital firms are stepping into this segment.

Looking at the overall pattern, it is apparent that with the government announcing the relief fund and stakeholders now proactively focusing on devising new funding mechanisms, the real estate sector would now start on the path of recovery and regain the needed traction in the long term.