Ever since the economy of India slipped to 5 per cent in the April-June quarter of the current financial year 2019 (recorded as the lowest in the last six years), real estate sector has been going through a rough phase. The crisis have led to difficult functioning of the builders with a huge number of housing projects left incomplete and homebuyers are equally disappointed for not being able to receive their properties.
However, the home buyers and builders can now breathe a sigh of relief as the government has come to the rescue of real estate to help regain its glory. On November 6, 2019, Finance Minister Nirmala Sitharaman in presence of Prime Minister Narendra Modi and Hardeep Singh Puri as the Minister for Housing and Urban Affairs announced ₹ 25,000 Crores fund to complete the stalled housing projects in the country.
Which real estate projects will be covered under this fund?
Government aided fund will undertake the responsibility of completing around 1,600 projects with 458,000 housing units.
Projects stated as non-performing assets (NPAs) by banks as well as those facing bankruptcy proceedings under the NCLT while meeting eligibility criteria will be included in the fund.
Projects facing litigation in higher courts are excluded from the scheme.
Out of the total incomplete housing units, around 100,000 units have been observed in Mumbai, around 200,000 units in the National Capital Region (NCR), and rest units in other cities.
Finance Minister said, “The creation of an Alternate Investment Fund (AIF) would revive the real estate sector and generate considerable employment. All those projects in affordable and middle income category will be now finding relief. Any project irrespective of stage of completion will be eligible if it is net worth positive and has Real Estate (Regulation and Development) Act or Rera registration”.
What is the significance of an Alternate Investment Fund (AIF)?
Besides the central government, there are other institutions which have contributed to the fund. The total fund declared as ₹ 25,000 Crores comprises of ₹ 10,000 Crores from the government, and rest from Life Insurance Corporation of India and State Bank of India. Moreover, high net worth individuals, large sovereign funds, and pension funds are welcomed to take part in AIF and help complete the projects under various stages.
Money coming from various sources will all be managed by SBI and kept in an escrow account. Disbursement of the fund will be done in a phased manner in which both builders and creditors will not have access to the capital.
What industry experts are saying about the government’s announcement?
CREDAI expressed its happiness with a ‘thank you note’ to the government through social media, saying, "Thank you for safeguarding home buyers' interests. Thank you for reviving over 4 lakh jobs in the real estate industry. Thank you for the much needed economic boost. A simple thank you cannot express the gratitude the nation feels for Honourable Prime Minister, Shri Narendra Modi, Honourable Finance Minister, Smt Nirmala Sitharaman and Honourable Minister for Housing and Urban Affairs, Shri Hardeep Singh Puri today. The releasing of ₹ 25000 Crores as Stress Fund to the Real Estate Industry shall prove to be a monumental step towards a growing India as many stuck real estate projects would come into momentum and eventually become a home for homebuyers. Moreover, those who lost their jobs due to the stalled projects will be revived, adding smiles to their world. Thank you again!"
Clicbrics, Property Consultant, said, "This initiative by the government will definitely improve the conditions in realty sector as well as lift up the sentiments of stuck home buyers. The long pending problems will finally be solved. The initiative is likely to increase demand for workforce, cement, iron and steel".