Finance Minister Honourable Nirmala Sitharaman on November 12 announced INR 18,000 Crores as an additional outlay to the real estate sector. The sector has gone through a downturn in terms of business this year due to the pandemic. The latest financial support from the government will help overcome obstacles.
An initiative by the government to speed up work in residential real estate
₹18,000 Crores has been announced for the urban housing scheme by Smt Nirmala Sitharaman with an intent to help complete real estate projects.
As a result of the Covid-19 outbreak, many real estate projects that were undergoing construction came to a halt. It happened due to the lack of funding and workers who went back to their villages. The builders couldn't finish construction and failed to handover properties to the respective buyers on time. The announced amount will help builders to be on track once again and complete their projects.
Smt Nirmala Sitharaman said, "₹18,000 Crores would be provided over and above the Budget Estimates for 2020-21 for the Prime Minister Awas Yojana (Urban) through additional allocation and extra-budgetary resources".
Besides completing the real estate projects, this move will also help in creating new jobs and further boost the economy. Around 78 lakh new jobs will be created as well as steel and cement will witness a rise in demand.
₹18,000 Crores for the urban housing scheme will be allocated to start work on 12 lakh houses as well as complete 18 lakh houses.
What's more from the government?
While expressing support to construction and infrastructure, Smt Nirmala Sitharaman said, "Earnest Money Deposit (EMD) and performance security requirements will be relaxed for government tenders. Performance security on contracts will be reduced to 3 percent instead of 5 to 10 percent. This would be extended to ongoing contracts which are free of disputes. It would also be extended to public sector enterprises, and states will also be encouraged to adopt the same".
"This move would give relief to contractors by reducing the locking up of capital and cost of bank guarantees. EMD will not be required for tenders and will be replaced by bid security declaration." - she added.
The above-mentioned relaxations will be given till December 31, 2021.
How financial aid from the government will benefit real estate?
- Delay and obstruction caused by the Covid-19 pandemic have affected the government's mission of "Housing for All by 2022". This financial aid announcement is a significant step in the right direction towards fulfilling the mission.
- It will help to generate employment as well as support other industries.
- Housing demand will see a rise, especially the real estate sector's affordable housing segment.