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D-Street experts say exports, housing sops for long term, won’t help in short term

The FM said the ECGC would expand the scope of export credit insurance scheme.

Updated: Sep 14, 2019, 05.41 PM IST
The FM added that the Export Credit Guarantee Corporation (ECGC) will expand the scope of export credit insurance scheme.
New Delhi/Mumbai: Market participants gave a thumbs up to the measures announced by Finance Minister Nirmala Sitharaman on Saturday for export and housing sectors, but said they would be helpful only in the long run.

"The contour of the plans are promising, but from a long-term perspective, and will not dramatically change the situation in the short term,” said Gautam Chhaochharia, MD and Head of Research at UBS Securities, India.

He said these plans are steps towards ensuring that the negative feedback loop bottoms out.

That was the popular tone among other top D-Street experts too.

Sameer Kalra, Founder, Target Investing, said the measures announced for exports are more structural, which will help only in the medium and long term. Among housing sector measures, only fund creation for unfinished projects is a proactive step, which will benefit select pockets as they will involve tough screening measures.

“Overall, these measures will not help economic revival in short term or reverse the downturn we are experiencing currently,” he said.

Announcing a third set of relief measures in one month, Finance Minister on Saturday revised priority sector lending (PSL) norms for exporters, which will involve release of additional funding of Rs 36,000 crore to Rs 68,000 crore to them.

PSL norms for export credit have been examined and enabling guidelines are under consideration of the Reserve Bank of India, Sitharaman said.

The FM said the Export Credit Guarantee Corporation (ECGC) would expand the scope of export credit insurance scheme.

Sitharaman said the initiative is expected to cost Rs 1,700 crore annually and would enable a reduction in the overall cost of export credit, including interest rates, especially for MSMEs.

There would be some relief for incomplete housing projects.

“The creation of a fund for stuck real estate projects is a very positive move. When we are talking of inventory in the market, it is all about half-done projects,” said independent analyst Ambareesh Baliga.

There is demand only for completed projects. This will ensure that half-finished projects see a completion, Baliga said.

Sitharaman announced a Rs 10,000 crore special window to provide last-mile funding for the completion of ongoing housing projects, which are not NPAs and not facing bankruptcy proceedings under NCLT.

This window will help the completion of affordable and middle-income housing projects. It will be managed by professionals, the FM said.

“Today’s measures were largely focused on housing and exports. The government is trying to identify stuck projects and help them by providing liquidity,” said Sanjeev Hota, Head of Research, Sharekhan.

“Overall, the announcements are positive for the housing sector, including for the construction and home finance companies. It will also benefit the banking space. The impact will be visible on these sectors in the medium to long term. The government is looking proactive in acknowledging the problems of these sectors,” Hota said.

With a rally of over 5.50 per cent, the BSE Realty index outpaced other sectoral indices last week on hopes of reformist measures from the government. Oberoi Realty, Godrej Properties and DLF soared 8 per cent each for the week ended September 2019.

Majority of housing finance companies (HFC) have plunged up to 87 per cent on a year-to-date basis till September 13, 2019, on the back of a lending squeeze due to a liquidity crisis for the non-banking finance companies.

With a fall of 86 per cent YTD, Reliance Home Finance stood as top loser in the pack of HFCs. It was followed by Dewan Housing Finance Corporation (down 79 per cent), SRG Housing Finance (down 65 per cent), Indiabulls Housing Finance (down 48 per cent) and Akme Star Housing Finance (down 35 per cent).

GIC Housing Finance, PNB Housing Finance, Gruh Finance, Repco Home Finance, LIC Housing Finance and Hudco are down 10-33 per cent so far this year, while the benchmark BSE Sensex gained 3.12 per cent during the same period.

On the other hand, Aavas Financiers, Can Fin Homes, Ind Bank Housing and Housing Development Finance Corporation have gained 79 per cent, 37 per cent, 4.54 per cent and 3.78 per cent, respectively, year to date.

The BSE Realty Index has declined more than 50 per cent in last 10 years.

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