Cabinet Approves Special Fund For Stalled Affordable And Middle-Income Housing Projects
Cabinet Tweaks Eligibility For Special Fund For Housing Sector
The Cabinet today approved an earlier announced scheme to provide funding relief to stalled housing projects across India, albeit with some tweaks.
The government will establish a special window to provide priority debt financing for the completion of stalled housing projects in the affordable and middle-income housing sector, said the government statement following a briefing by Finance Minister Nirmala Sitharaman. A government study has assessed that over 1,600 such housing projects are stalled, totalling 4.58 lakh housing units.
Using this special window of Rs 10,000 crore, an alternate investment fund will be set up with government as sponsor. State Bank of India and the Life Insurance Corporation are also expected to contribute to the AIF. The starting corpus is expected to be Rs 25,000 crore, said the finance minister. As stated over a month ago, the government expects participation from sovereign and pension funds and other institutional investors.
The AIF will be entrusted to a professional investment manager - SBICAP Ventures Ltd.
The government statement said the last mile funding will be for projects that meet the following criteria:
- Affordable and middle-income housing project
- Reference by existing lender
- On-going projects registered with RERA
- Net-worth positive
- Will include stressed projects classified as NPA and those in NCLT
When the Finance Minister had first announced this funding mechanism in September, the eligibility conditions excluded projects that had been labelled non-performing or which were in insolvency proceedings. Those two conditions have now been withdrawn.
The AIF will fund stalled projects via escrow accounts. The process to be followed is:
- A detailed investment policy to be laid down to guide selection of projects
- Due diligence will include legal due-diligence, title due diligence, micro-market analysis, financial analysis, etc
- The AIF investment committee, comprising of experienced professionals and industry experts, will approve individual deals
- The investment process oversight will be entrusted to an advisory board.
- A governing council may also be formed for strategic guidance
- The investment manager will be responsible to ensure that the funds are used only for construction through appropriate safeguards
Watch the finance minister’s press conference here
Real Estate Not Addressed Completely: Finance Minister
Finance Minister Nirmala Sitharaman on Tuesday had acknowledged that the government is yet to fully address the liquidity crunch faced by the real estate sector.
The government is working very closely with the Reserve Bank of India to tweak existing laws to help the affected people, Sitharaman said at the silver jubilee celebrations of the National Stock Exchange in Mumbai.
The finance minister emphasised that the real estate sector requires much more attention. The sector has a spillover effect on very many industries, especially the core sector, Sitharaman said, adding that addressing the issues of the sector will also benefit the core industry that supplies materials to the real estate sector.
In September, Sitharaman had announced the creation of a special fund to provide financing to the many stalled affordable and middle-income housing projects in the country.
Another Set Of Reforms Coming?
Finance Minister Nirmala Sitharaman is set to announce the decisions taken in the Union Cabinet meeting today.
On Tuesday, the finance minister had said that the government will use its strong electoral mandate to bring more reforms. “We will push forward with those reforms which have missed the bus last time, but won't miss the bus now,” she had asserted.
With economic growth lingering at a six-year low, Sitharaman has already announced a string of reforms including a lower corporate tax rate, rollback of FPI surcharge and merging few state-run lenders.
The government has also announced few measures to provide relief to the housing sector and boost exports. One such proposal was to set up a special fund to provide last-mile funding to affordable and middle-income housing projects that are stalled due to a liquidity crunch.