Yesterday after raising concerns over the problems faced by the real estate sector, saying that the ailing sector required a lot of attention, Finance Minister Nirmala Sitharaman in a media brief in Delhi today announced measures the central government has decided to undertake to boost the real estate sector by infusing funds to revive stalled housing projects.
In the press conference, the union minister announced that the cabinet has approved setting up a “Special Window” to provide priority debt for completing stalled affordable and middle-income housing projects. As part of the measure, funds worth ₹25,000 crore will set up, where the government will contribute ₹10,000 crore. The government shall act as the sponsor of the fund which will provide relief to developers with unfinished projects and ensure delivery of homes to buyers, said the minister.
Special Window to provide last mile funding to projects meeting these criteria:
●Affordable & middle-income housing project
●On-going projects regd with RERA
●Reference by existing lender
●include stressed projects classified as NPA & NCLT
— K.S. Dhatwalia (@DG_PIB) November 6, 2019
The government will first fund Rs 10,000 crore. The rest amount will come from participation from SBI and LIC. The total funding from the government and SBI and LIC put together is expected to have a starting value at around Rs 25,000 crore. Other than SBI and LIC, sovereign and pension funds will also be able to invest in the fund. The funds will be set up as Category-II Alternate Investment Fund (AIF) registered with SEBI, and the first AIF so set up will be managed by SBICAP Ventures Limited through an escrow account.
Admitting that the realty sector has been left out of the booster measures announced earlier, the Finance minister in the press brief said that the government and Reserve Bank are working in unison to resolve the issues being faced by this sector. She said the sector has a spillover effect on many sectors, especially the core 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,” said Sitharaman.
“Lot of homebuyers have approached us. They are stuck in a situation where they have paid an advance but don’t have their housing units built. Approximately 1,600 projects are stalled, which is around 4.58 lakh housing units”, furthered the FM. These stuck projects are at various stages of completion.
Even if the project is a non-performing asset, or is incomplete, or a project is under the arbitration of NCLT can be covered under this scheme, provided the project has not gone under liquidation already, confirmed Nirmala Sitharaman while briefing media in Delhi today.
The main criteria to be covered under this scheme is that the project’s net worth must be positive. RERA registered incomplete projects will be evaluated for its net worth. The AIF will fund RERA registered incomplete projects which are over 30 per cent complete, said the minister.
Sitharaman confirmed that since August the government has been making various interventions to revive the market and consumer demand. Still, there is a lot of work to be done and “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.”
A statement released by Finance Mininstry regarding the move said, “The Special Window would provide funds to stalled housing projects enabling them to complete unfinished projects and consequently ensure delivery of homes to a large number of home-buyers. This will, in due course, help relieve the financial stress faced by a large number of middle class home buyers who have invested their hard earned money. This will also restore trust between buyers and developers and boost the sentiments of the housing sector as a whole and release large amount of funds stuck in these projects for productive use in the economy.
The creation of special window for affordable and middle income housing projects would revive the real estate sector and generate considerable employment. Besides, revival of the sector will also lead to demand of Cement, Iron & Steel Industries giving further impetus to generate more employment. This initiative will have a positive effect in releasing stress in other major sectors of the Indian economy as well.”