Cabinet approved Rs 25,000 crore alternative fund for stalled housing projects.
The government will invest Rs 10,000 crore in this fund,
while SBI, LIC, and other sovereign funds will all generate funds of Rs 25,000
crore. Only RERA-registered projects with positive net worth will be
funded. NPAs apply to fund NCLT-referenced housing projects.
Alternative Investment Funds (AIFs) can
also be used by projects that have been declared non-performing assets or are
facing insolvency proceedings.
Offering relief to millions of homebuyers, FM Nirmala
Sitharaman announced an alternative investment fund of Rs 25 crore to help
the real estate sector for stalled
housing projects as it boosts the economy by kick starting incomplete
housing projects.
The decision was approved by the Union Cabinet in a meeting
chaired by Prime Minister Narendra Modi.
The government will invest Rs 10,000 crore in this fund,
while SBI, LIC and other sovereign funds will create a fund of Rs 25,000 crore
in all.
“An AIF (Alternative Investment Fund) will be created.
The government will
create a fund of Rs 10,000 crore and others, such as SBI and LIC, of Rs
25,000 crore each” she
told a press conference after the Union Cabinet meeting.
Now she added other Quote, "This grant will be used to cater to housing units of less than Rs
2 crore in Mumbai, Rs 1.5 crore in Delhi-NCR, Chennai”. On Tuesday, FM
Nirmala Sitharaman had said that the government and the Reserve Bank of India
(RBI) are in the process of fixing the problems facing the real estate sector.
Now she added in her statement is 1,600 delayed housing projects with 4.58 lakh homes would benefit from
the alternative funding mechanism, with the Reserve Bank of India (RBI) and its governor likely to negotiate
with home buyers.
The fund size will increase as sovereign and pension funds
are expected to participate in this AIF. “AIF
can also be used for projects that are reported to be non-performing assets or
facing insolvency action” these words spoken by her.
“The main criterion
under the scheme is that the net worth of the project should be positive” she said.
The
fund is not limited to projects in Delhi-NCR or Mumbai.
She
said that every project in any part of
the country meets the criteria if it can avail the funding.
The AIF was first announced by Sitharaman on 14 September
2019 which will act as a 'special window' for lending to over 1,600 incomplete affordable housing and medium-low
income housing projects.
The plan is a revised version of the 14 September plan. The major change is allowing the AIF to
finance projects that banks or lenders may have declared as non-performing
assets (NPAs) or that have been transferred to NCLT for insolvency proceedings.
The fund is not limited to projects in Delhi-NCR or Mumbai.
She said that every project in any part of the country meets the criteria if it
can avail the funding
However, it stated that only
RERA registered projects would be provided with funds along with net worth.
SBI Cap will initially
maintain the fund through an escrow account. AIF funds will be released in
phases and it will be preferred to the projects as per the development and
funds for any project will be deposited in escrow of that particular project in
a phased manner based on the percentage of completion of construction.
Now she express her statement “Adding to the realty AIF would
be incomplete projects where housing units in non-metro areas are priced below
Rs 1 crore and up to Rs 2 crore in Mumbai and up to Rs 1.5 crore in Delhi-NCR,
Chennai, Pune, Hyderabad, Ahmedabad”.
Sitharaman said that the government is understanding the
problem of homebuyers, who are obliged to pay EMI on the loan obtained to buy
the house, but they are yet to get ownership and continue to pay both EMI and
rent.
On Tuesday, she admitted that the problems facing the real
estate sector have not been completely resolved, which is a concern as it has
an impact on many sectors.
Meanwhile, the Real Estate Developers Association Confederation of Real Estate DevelopersAssociation of India (CREDAI) welcomed the move, saying it would solve the
long-pending problem of homebuyers.
Real estate developers are finding it difficult to raise
funds following a failure by the IL&FS group, which led to a liquidity
crunch in the economy. This was mitigated by the economic downturn, which on
one hand led to massive inventory piles due to lack of demand and stalled or
delayed ongoing projects due to lack of funds.
What do real estate
experts say on this?
"This will be a win for home buyers and real estate
developers, as it will help ease the financial burden for homebuyers who have
invested their hard-earned money, while producing productive goals like this
There are also bailout funds stuck in delayed projects.
“The fund will help around 1,600 delayed housing projects in
the country, and it is positive that the aspect of NCLT / NPA will not be a
monstrous stone to stop projects delayed in reaching the fund. The positive
results of the move include job creation, improving demand for cement, iron and
steel industries and reducing tensions in other key sectors of the economy”.
“This is very welcome move from the first announcement (from
14 September). Now the only standards for eligibility are Net worth Positive
Project. This will ensure that the fund is actually disposed to complete
incomplete projects, which are also in the NPA or NCLT ”said Jaxay Shah,
President of CREDAI.
Will home buyers stuck
with this announcement benefit?
"We are certain that stuck home buyers will benefit from
the Rs 25,000-crore stress fund decision, which is going to increase in value
if needed," Shah said, adding that the quick disposal of funds and
effective decision making The eligibility of projects for will solve the
long-pending difficulties of home buyers.
What are the various
steps taken by the government to revive the realty market? Or, for the latest
announcement for Nirmala Sitharaman's immovable property.
Since August, the government has been taking several steps to
strengthen market and consumer demand. Recently, the government reduced the corporate tax rate to 22%, with a loss
of Rs 1.45 lakh crore.
Yesterday, on 5 November, the Finance Minister said
that the government is working in a pinch to the current norms to promote the
real estate sector.
In September 2019, Sitharaman announced six major steps to
encourage exports, including a mega annual shopping festival like Dubai from
next year, new automated return systems for the exporter and new RoDTEP scheme
on export duties.
To motivate government servants to buy new homes, interest
rates on house building advances would be reduced and combined with a 10-year
G-Sec yield.
Which industries will
benefit from this step?
