Nirmala Sitharaman announces booster dose for exports, realty sector
Finance Minister Nirmala Sitharaman on Saturday announced another set of measures to boost the economy that included over Rs 50,000 crore package for exports and creation of a Rs 20,000 crore fund for unfinished real estate projects to complete about 3.5 lakh dwelling units in affordable and middle income segments.
The finance minister said the government will contribute Rs 10,000 crore in setting up a special window “to provide last mile funding for housing projects which are non-NPA [non-performing asset] and non-NCLT [National Company Law Tribunal] projects and are net worth positive in affordable and middle income category,” and contributions of “roughly the same amount” will come from outside investors. Sitharaman had already announced two other sets measures to boost the economy last month on August 23 and August 30.
“GoI [Government of India] on the lines of NIIF [National Investment and Infrastructure Fund], can contribute to the fund while the rest of the investors would be LIC and other institutions and private capital from banks, sovereign funds, DFIs [development finance institutions] etc,” she said.
The fund will provide much needed “last mile funding” for the unfinished housing projects and help about 3-3.5 lakh housing buyers across the country, she said.
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Replying to a question regarding the fate of lakhs of under-constructed dwelling units stuck due to various reasons including initiation of liquidation process against the builders, Economic Affairs Secretary Atanu Chakraborty said the number of such units are around 8.5 lakh and they are in the process of resolution. “Even buyers of such units are recognised as operational creditors under the IBC [Insolvency and Bankruptcy Code] and they would get their dues,” Sitharaman added.
In order to provide additional liquidity to the real estate sector, the government is planning to relax external commercial borrowing (ECB) guidelines in consultation with the Reserve Bank of India (RBI) to facilitate financing of home buyers who are eligible under the Pradhan Mantri Awas Yojana (PMAY). “This is in addition to the existing norms for ECB for affordable housing,” she said.
She said interest rate on house building advance for government servants would be lowered and linked with the 10-year G-Sec yields to spur demand. “This will encourage more government servants to buy new houses,” she said.
Announcing incentives for exporters, Nirmala Sitharaman said a new WTO-compliant scheme for reimbursement of taxes paid on exports -- the Remission of Duties or Taxes on Export Product (RoDTEP) – would come into effect from January 2020. This would replace the existing system of Merchandise Exports from India Scheme (MEIS). The new scheme will “more than adequately incentivise exporters” as compared to existing schemes, she said.
According to director general of foreign trade Alok Vardhan Chaturvedi, the total revenue forgone under RoDTEP is estimated at Rs 50,000 crore, which is about Rs 5,000-10,000 in excess to the existing scheme that will lapse on 31 December 2019.
The government will also contribute Rs 1,700 crore annually under the Export Credit Guarantee Corp (ECGC) to offer higher insurance cover to banks lending working capital for exports. “This will enable reduction in overall cost of export credit including interest rates, especially to MSMEs [micro, small and medium enterprises],” Sitharaman said.