Centre announces INR 25,000 crore fund to revive stalled projects

Real Estate Fund

The Union Cabinets approval on the INR 25,000 crore corpus for the real estate industry through a special window to provide priority debt financing, focused on the completion of affordable and mid-segment housing projects, brings cheers to numerous home buyers who have invested in stuck projects. This announcement will provide support to over 4.58 lakh housing units across 1,600 stalled housing projects in the country.

The funds will be set up as Category-II Alternate Investment (AIFs) fund registered with SEBI.

NewsBarons connect with leading real estate developers to present their views and opinions on the announcement.

Highlights:

• Priority debt financing for Affordable and Middle-Income Housing projects
• Over 4.58 lakh units across 1,600 stalled housing projects to benefit
• To include stressed projects under NPA and NCLT

 

The fund will help nearly 1,600 stalled housing projects in the country: Dr. Niranjan Hiranandani, Hiranandani Group

www.newsbarons.comThe vexed problem of delayed and stalled real estate projects appears to have found a solution, with the Hon’ble Finance Minister announcing Cabinet Approval of the scheme to provide ‘last mile funding’ for such projects, which she had proposed earlier.

The funds will be used to provide priority debt financing for the completion of stalled housing projects in the Affordable and Middle-Income Housing sector, providing relief to developers with unfinished projects as also ensuring delivery of homes to buyers.

If the developer has not declared liquidation, they can avail the cover, the Hon’ble Finance Minister said. This will be a win-win for home buyers and real estate developers, as it will help alleviate financial stress faced by homebuyers who have invested their hard-earned money, while also releasing funds stuck in such delayed/ stalled projects for productive purposes.

The fund will help nearly 1,600 stalled housing projects in the country, and it is positive that the aspect of NCLT/ NPA will not be a stumbling block to prevent stalled and delayed projects from approaching the fund.

Positive impact of the move include generation of employment, revival of demand for cement, iron and steel industries and relieve stress in other major sectors of the economy.

The announcement that State Bank of India (SBI) and Life Insurance Corporation of India, sovereign and pension funds would also contribute to the fund, is welcome, he said, adding that the announcement will prove to be a win-win for both, home buyers as also real estate developers – “but the devil in the detail in this case will be quick implementation.

This move will give relief to aggrieved homebuyers: Anuj Puri

www.newsbarons.comMuch in line with her promise to bring relief to the realty sector, the FM announced that an INR 10,000 crore fund has got the Union Cabinet nod. To be used for last-mile funding of stuck affordable and mid segment projects, this is a critically important move which eliminates the ambiguity which surrounded the timelines for setting up the fund, and its actual implementation. Finally, countless aggrieved homebuyers will see the light at the end of the tunnel.

This move couldn’t have come at a better time because the delay was causing serious apprehensions. The delay in the on-ground deployment of the stress fund gave rise to severe apprehensions about the main issues – that of stuck and delayed projects – that had remained unaddressed so far. The timeline for setting up this fund and its actual implementation is quite critical.

Also, the special window will get investments from institutions like LIC, SBI and others which will take the corpus to nearly INR 25,000 crore. The fund will also be open to other sovereign funds to add to the corpus. More importantly, several NPA projects and those facing bankruptcy proceedings under NCLT shall also be included provided they are not referred for liquidation. This will bring in even more stalled projects into the eligibility criteria and give relief to more aggrieved homebuyers.

As per ANAROCK data, a total of 5.76 lakh units (launched in 2013 or before) across budget segments are stuck in various stages of non-completion in the top 7 cities alone.

A much-needed booster: Ramesh Nair, JLL India

www.newsbarons.comThe Cabinet’s approval of a special window for funding of stalled affordable and middle-income housing projects to enable homebuyers to get delivery of homes locked in stalled housing projects is an extremely positive move. This move by the honourable FM is likely to become a game changer as it now includes projects, which are NPA or are under NCLT, a major pain point that was left unaddressed in the last announcement. This will be a respite to homebuyers, whose dream of owning their own house have been long shattered owing to uncertainties in project deliveries. At the same time, it protects the interests of the private investors who are expected to contribute nearly 60% to this proposed fund. Stringent criteria with respect to projects being net worth positive, registration with RERA, appraisal by investment committee will ensure safety and protection of commercial returns for the investors. The registration of projects with RERA being one of the necessary conditions, this measure will have a far reaching impact on states which are lagging behind in the implementation of the reform. At the same time, states which have not implemented RERA may not benefit from this liquidity shot.

JLL’s recent study showed that Delhi NCR contributed to more than 60% of delayed residential units followed by Mumbai, constituting nearly one-fifth of the overall delayed units across the top seven cities in India. It has come at an opportune moment when the residential market is tackling the headwinds from the trickle down impact of the series of reforms and economic slowdown. While it will boost consumer sentiment and enhance confidence, it will act as a strong catalyst in pushing the sales velocity.

Big relief for builders who were keen to raise funds to complete projects: Surendra Hiranandani, House of Hiranandani

www.newsbarons.comThe government’s move to create a Rs 25,000-crore fund to help complete stalled housing projects is a welcome move which will provide relief to homebuyers as well as developers and boost housing demand. The decision will be a big relief not only for consumers whose delivery is stalled but also for the builders who were keen to raise funds to complete their projects but unfortunately couldn’t complete them because of lack of funds. Hence it will solve the liquidity crisis of the developers, boost sentiment and trust between buyers and developers.

Going forward, this step will definitely drive growth by steering consumption in real estate and associated sectors and will help generate considerable employment. It will also have a positive effect in releasing stress in other major sectors of the economy as well. This decision would have a wider impact and will go a long way in building confidence in the real estate sector not only from the end user perspective but also from an investors” perspective by accelerating the much-sought investments and growth. It will also encourage prospective buyers who have delayed the buying decision.

The funds will bankroll the stalled projects in the affordable and mid-income housing segment: Rohit Poddar, Poddar Housing and Development

www.newsbarons.comThis stimulus package has been announced majorly for the NPA projects under RERA. The funds will bankroll the stalled projects in the affordable and mid-income housing segment and keep the needle moving in the micro markets. It will also revive the demand for construction materials and assuage the stress in other major sectors in the economy.

The announcement will help lot of stuck projects: Parth Mehta, Paradigm Realty

Parth Mehta-MD-Paradigm RealtyThe recent announcement by Finance Minister to let the AIF with corpus of Rs. 25000 crore to even look at NPA and NCLT projects a modification from earlier non-NPA and non-NCLT will help lot of stuck projects which are at a good construction stage but have got stuck due to lack of project finance or adequate sales helping the buyers of Rs 1 crore & less ticket sizes which is typically a first home for salaried families in metro.

The announcement will help restore some buyer confidence: Kiran John, Terapact

Kiran JohnThis will create a new avenue of relief and will help restore some buyer confidence. Most of the benefit will be felt in Mumbai and NCR. One question still unanswered is whether the programme will be expanded to include a wider range of eligible projects, as the current definition does limit the inclusion of a vast number of projects that could benefit. Demand in the affordability segment has been strong and in several cases sufficient to fund cash flow issues already. Badly planned and executed projects may need to resort to heavy discounts to sell inventory even with this help. Overall buyer sentiment will improve knowing that the government is rolling out a concrete plan to boost the sector and a consolidated effort has already been put into motion.