Government Stimulus Underlines A Self-Reliant India, Major Boost For The Real Estate Sector

The emphasis on a ‘self-reliant’ India is based on the potential and the inherent strength of the country’s domestic demand.

12 Jun 2020

By Anshuman Magazine

Government Stimulus Underlines A Self-Reliant India, Major Boost For The Real Estate Sector
The INR 20 lakh crore (USD 266 billion) economic package announced by the Prime Minister is heartening. Estimated to be around 10% of India’s GDP, the stimulus will not only provide relief but will also ensure a faster turnaround. The emphasis on a ‘self-reliant’ India is based on the potential and the inherent strength of the country’s domestic demand. These five pillars – stronger economy, better infrastructure, technology driven system, vibrant demography and demand – will position India on a stronger footing in the long run. Over the past three days, the Finance Minister has enlisted several measures as part of this package – covering micro, small and medium enterprises (MSME), non-banking financial companies (NBFC), micro finance institutions (MFI), housing finance companies (HFC), farmers and migrant labourers amongst others. Although the overall stimulus announced by the Prime Minister includes the INR 1.7 lakh crore relief package for the poor provided previously; it is amongst the largest financial packages announced by governments across the world to deal with the economic disruption caused by the COVID-19 pandemic.
Some of the key measures announced are as enclosed:

Construction / Housing Sector

The finance ministry has provided certain incentives to the construction and housing sector to reduce the stress it is currently under. It has extended all central agencies’ contracts by up to 6 months (without costs to the contractor), with the agencies asked to partially release bank guarantees to the extent contracts have been partially completed, so as to ease cash flows for contractors. Further, COVID-19 would be treated as an ‘Act of God’ and ‘Force Majeure’ can be invoked to secure a six-month extension of registration and completion timelines for all RERA-registered projects whose registration was expiring on or after 25 March 2020. This will provide relief to the developer community which was facing issues due to labour migration and lack / delayed supplies.

The government further strengthened the affordable housing segment by extending the Credit Linked Subsidy Scheme (CLSS) for the middle-income group up to March 2021. In addition, it opened a new investment class in the form of an affordable rental accommodation scheme for migrant workers and urban poor under the PM Awas Yojana. Under this scheme, government-funded housing in cities would be converted into Affordable Rental Housing Complexes (ARHC), while at the same time the government will provide incentives to manufacturing and other industries to build affordable housing units.

NBFCs, MFIs and HFCs

The government’s relief package for these three sets of companies has come at an opportune time and will especially benefit the real estate sector as these companies are one of the largest lenders for the industry. As part of its relief measures, the government has launched an INR 30,000-crore special liquidity scheme for NBFCs, MFIs and HFCs – which will involve investment in both primary and secondary market transactions in investment-grade debt papers of these companies. This is likely alleviate the short-term liquidity woes of these companies. The government has also extended a pre-existing partial guarantee scheme for NBFCs to cover borrowings such as primary issuance of bonds. The government will bear the first 20% of the loss incurred; papers rated AA and below will also be eligible for investment.


MSMEs are the backbone of the Indian economy and one of the most severely affected segments due to the COVID-19 pandemic. This is why, the government opted to focus on this sector in the first tranche of its relief measures. Collateral-free automatic loans worth INR 3 lakh crore will be provided to these enterprises with a time frame of four years and a 12-month moratorium. Combined with the INR 20,000- crore subordinate debt, these measures will go a long way in providing liquidity to stressed MSMEs and enable them to retain employees as well as kick start production.

The government also provided them an INR 50,000-crore fund of funds through ‘mother fund-daughter fund’ to enable them to expand capacity – this will benefit about 25 lakh stressed MSMEs (according to the MSME ministry).


While this package is expected to provide much-needed liquidity to the economy, the extension of project completion timelines and other statutory compliance's is welcome news for the real estate industry. We are hopeful that more measures will be announced by the government to support the industry in the coming few days.

This Article first appeared in Business World