SME Times News Bureau | 06 Nov, 2019
In a much-awaited relief for distressed homebuyers
awaiting possession of their flats, the Union Cabinet approved on Wednesday a
corpus of Rs 10,000 crore for completing housing projects stuck for years.
For the purposes of the fund, the government shall act as
the Sponsor and the total commitment to be infused by the Government would be
upto INR 10,000 crore.
The fund will be set up as a Category-11 AIF (Alternate
Investment Fund) debt fund registered with SEBI and would be professionally
run.
For the first AIF under the Special Window, it is
proposed that SBICAP Ventures Limited shall be engaged to be the Investment Manager.
This fund would in turn would provide relief to
developers that require funding to complete a set of unfinished projects and
consequently ensure delivery of homes to the home-buyers.
Since the real estate industry is intrinsically linked
with several other industries, growth in this sector will have a positive
effect in releasing stress in other major sectors of the Indian economy as
well.
The Hon'ble Finance Minister on September 14, 2019 had
announced that a special window for affordable and middle-income housing would
be created. This special window will provide last mile funding for housing
projects which are stressed.
Subsequently, Inter-ministerial consultations and several
stakeholder consultations were held with the housing industry including Housing
Finance Companies, Banks, NBFCs, Investors, and Real Estate Developers.
Problems being faced by home buyers, developers, lenders, and investors were
ascertained that could be addressed through the Special Window.
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.
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.