New Delhi, Nov 6 (IANS) In a much-awaited relief for distressed homebuyers awaiting possession of their flats, the Centre on Wednesday committed up to Rs 10,000 crore for completing housing projects stuck for years.
The Union Cabinet has cleared a proposal to set up a ‘Special Window’ in the form of Alternative Investment Fund (AIF) to provide priority debt financing for the completion of stalled housing projects that are in the affordable and middle-income housing sector.
The corpus size of the AIF would be scaled up to Rs 25,000 crore after SBI and LIC pump in funds. It would grow further in the coming days with the addition of sovereign wealth funds and pension funds.
The AIF would meet fund requirements of 1,600 stalled projects where money of 4.58 lakh homebuyers are stuck, Finance Minister Nirmala Sitharaman said briefing the media after Cabinet meeting.
The Special Window will also cover projects that are classified as NPA or where NCLT proceedings have already started but with the rider that they meet other eligibility criteria. Some of the conditions for getting the last-mile funding are projects being networth positive, registered with RERA and falling in the category of affordable and middle-income housing project.
Department of Economic Affairs secretary Atanu Chakraborty said that networth positive clause will be applied project-wise taking into account cash flows and total project cost and not at the corporate level.
This would mean even projects being undertaken by now bankrupt Amrapali and Jaypee Group could qualify for funding depending on the completion status.
Anticipating realty sector booster from the government, the Indian stock market on Wednesday surged to record levels. It may touch a new peak tomorrow, bolteriung realty sector stocks.
“It’s a very welcome change from the initial announcement. Now the only criteria for eligibility is net worth positive projects. This will ensure that the fund is actually deployed to complete projects which are even NPA or also in NCLT. We are certain that a majority of stuck homebuyers will benefit from the announcement of a Rs 25,000 crore stress fund…Quick deployment of money and efficient decision making for qualification of projects will solve the long pending problems of home buyers,” Jaxay Shah, CREDAI National Chairman, said.
Sitharaman 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 homebuyers.
She said that the move would reduce 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 amounts of funds stuck in these projects for productive use in the economy,” a press statement said.
The proposed fund would initially be managed by SBI Caps through an escrow account. It will also be registered with market regulator SEBI and will support all RERA certified projects.
“This is a critically important move which eliminates the ambiguity which surrounded theAtimelines for setting up the fund, and its actual implementation. Finally, countless aggrieved homebuyers will see the light at the end of the tunnel,” Anuj Puri, Chairman a” ANAROCK Property Consultants said.
Finance Minister Sitharaman had in September announced that a special window for affordable and middle-income housing will be created for providing last-mile funding for housing projects which are stressed.
Fund created under the Special Window will be setup as priority debt funds. A detailed Investment Policy will be laid down to guide the selection of projects to be financed through a detailed due-diligence process that will include legal due-diligence, title due diligence, micro-market analysis, financial analysis etc.
“The final decision will be taken by the Investment Committee of each fund comprising experienced professionals and industry experts. The Investment Committee will approve individual deals independently as per Investment Policy ensuring alignment with investment objectives of the Fund,” the statement said.
Sitharam also said that RBI has also issued a clarificatory note that would allow banks to release pendingAloan amounts of home buyers whose money has got stuck in stalled projects.
In order to give a boost to crisis-hit real estate sector, the government has in the last few months announced a slew of measures. It has provided additional deduction up to Rs 1,50,000 of interest paid on loans borrowed up to March 31, 2020 for purchase of houses valued up to Rs 45 lakh.
The interest rate on House Building Advance has also been lowered and linked with the 10 Year G Sec Yields to encourage more government servants to buy new houses among other key measures.