Continuing for the sixth year with British economist John Maynard Keynes’ discredited theory that government spending rejuvenates the market, Finance Minister Nirmala Sitharaman today announced a ‘big relief’ for the real estate sector. She announced that a decision had been taken to provide funds worth Rs 10,000 crore by the government for the stuck housing projects across the country.
In fact, Sitharaman admitted in today’s presentation “we may have missed the bus the last time”.
The finance minister said that this fund for the real estate sector would be used to complete the stuck projects so that those who have booked their houses get them. The amount of Rs 10,000 crore will be released initially under this fund. Apart from this, LIC Housing and SBI will pour in money. Sitharaman said that the total fund earmarked for the purpose is Rs 25,000 crore.
The finance minister said that the real estate sector fund would be used for affordable homes and middle-income projects. She said that a special window scheme would be launched to provide relief to debt-ridden housing companies, separating them from companies that deliberately cheated home buyers by investing in ever-new projects rather than on completion of the existing ones.
According to the government, about 1,600 housing projects in the country are stuck and 4.58 lakh houses are left incomplete in these projects. Sitharaman said that in the last two months, there were several meetings that homebuyers and bank representatives attended.
After the latest Cabinet meeting, the finance minister said that with the help of the government, LIC and SBI, a fund of Rs 25,000 crore would be created. This will help the homebuyers. She said that funds would be provided on cheap, easy terms. If the finance minister believes that the projects that have become non-performing assets (NPA) or are in the National Company Law Tribunal (NCLT), they will be benefited, too.
Finance Minister Sitharaman had said on Monday that the government and the RBI were working towards solving the problems of the real sector. “The government is very keen and is working very clearly together with the RBI to see how best we can, where necessary, tweak the existing norms to help the people who are affected in the realty sector,” she had said at an NSE event. “One particular sector which I have not touched, but which has a lot of positive impacts and also can affect an impact for the stock market, is the real estate sector,” the finance minister had said.
A real estate research and analytics firm PropEquity reported that sales of housing units fell 10% across the top nine cities of the country to 52,885 units in the third quarter of 2019 versus the year-ago quarter. Sales fell 9% over the second quarter of 2019.
Today Sitharaman nearly conceded that the manner of handling the economy was not the strongest of reasons for Narendra Modi leading the BJP to a greater mandate in 2019 than 2014 and issues like India’s military retaliation to Pakistani terrorism could have played a role in determining the election result. She said, “It is not possible for any government, be it at the Centre or in the states, to say, ‘Give me your vote on nationalism and I do not want to talk about economic issues’. Is the voter going to be indulgent enough to say ‘alright, the prime minister doesn’t want to talk about the economy; so we won’t talk about the economy’?”
That notwithstanding, Keynes continues to charm Indian economic policymakers even after liberalisation and globalisation of the 1990s. As finance minister, prime minister and then opposition leader Manmohan Singh has quoted him often in his speeches in Parliament. Chief economic adviser of Arun Jaitley’s era Arvind Subramanian cited Keynes in 2017. Criticisms of Keynes by economists that followed him, like borrowing causing higher interest rates, encouragement to big governments (the opposite of which Narendra Modi as BJP’s prime ministerial candidate in 2014 had promised), resources crowding out, output gaps turning unpredictable, etc are not factored in by India’s policymakers.