Today, at the first National RERA Conclave, organised by the UP RERA in Lucknow, RICS and NAREDCO released a report titled 'Breaking the Barriers — Reinvigorating Real Estate Finance in India'. The report outlines a way to create a robust real estate financial system, which is very much needed, given the current concerns and challenges in the sector.
The onset of regulations and reforms introduced from 2016 onwards "brought out the skeletons" in the sector, leading to an environment of mistrust among customers, thereby fuelling a consumption crisis, as well as a financial crisis. While the commercial, retail, hospitality and industrial segments are growing, residential markets have taken a beating. Therefore, there is a need for immediate intervention through government's monetary policy, fiscal tools and macroprudential measures, in order to handle the crisis.
According to the report, solutions must be categorised in accordance with the severity of the problem. The good news is that a majority of the problem-projects can be managed through key collaborative actions between the government, authorities, financers, developers and customers, while others will require larger measures for resolution.
The report also lists several challenges that the sector is currently grappling with that need attention. These include:
- A consumption crisis where customer sentiment is being driven by lack of trust and confidence in the market and stakeholders.
- NPAs and write-offs being at an all-time high.
- Declining capital adequacy ratio.
- Lack of skills and professionalism in the construction and BFSI sectors.
- RERA lacking the "teeth" to perform effectively as a not just a regulator, but also aide in the development of the sector.
- A highly litigious market emerging, where false and avoidable claims are also being brought to the fore and adding unnecessary pressure on the judiciary, regulators and conciliatory forums.