This Article is From Nov 06, 2019

Centre Announces Rs 25,000-Crore Fund For Stalled Real Estate Projects: 10 Things To Know

Finance Minister Nirmala Sitharaman said the government will put in Rs 10,000 crore in this alternative investment fund (AIF).

The Alternative Investment Fund will help over 1,600 stalled housing projects, the Finance Minister said.

The government on Wednesday announced a Rs. 25,000-crore special window for stalled real estate projects, in a move aimed at reviving the ailing sector and generating employment. Finance Minister Nirmala Sitharaman said the government will put in Rs. 10,000 crore in the Alternative Investment Fund (AIF) and the remaining amount will be provided jointly by State Bank of India (SBI) and Life Insurance Corporation (LIC). The government's nod to the first Alternative Investment Fund (AIF) under the special window comes at a time when the country's real estate sector is struggling against low demand and hundreds of delayed projects.

Here are 10 things to know:

  1. The fund will help more than 1,600 stalled housing projects comprising 4.58 lakh housing units across the country, the Finance Minister said.

  2. "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 home-buyers," the minister said.

  3. The size of the fund would increase further with participation from sovereign funds which have expressed their interest, the Finance Minister added.

  4. The development comes amid property developers finding it difficult to raise funds after the default by the IL&FS group last year highlighted a liquidity crisis in the economy.

  5. The fund will provide priority debt financing for the completion of stalled housing projects in the affordable and middle-income housing segments, Ms Sitharaman said.

  6. The fund 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, an official statement said.

  7. The fund will also lead to higher demand for cement, iron and steel industries, it added.

  8. The minister said this could include housing projects that had turned to non-performing assets for banks, as well as ones that were in bankruptcy court. The fund would, however, steer clear of projects that have already been ordered to be liquidated, she added.

  9. The country's real estate sector has been hit by a severe liquidity crunch this year after a series of debt defaults by non-banking finance companies, also known as shadow lenders.

  10. The cash-flow squeeze has in turn halted building projects that have left numerous homebuyers stranded even after paying their monthly instalments.