The fund will be used to finish stalled housing projects across India but as per parameters, there are certain limitations that need to be understand.
Home buyers of stalled housing projects can expect their homes soon. Demand of last mile funding has got approval of govt. is the name of AIF (Alternative Investment Fund) for real estate sector. This is expected to cover 4.58 lakh units in 1600 projects across India. Key factors of this announcement are:
AIF– Cabinet has granted Rs. 25,000 cr for stalled housing projects. Apart from the amount, condition of non NPA and NCLT projects has been removed that is a big factor for home buyers. Amount will be transferred to escrow account and will be monitored by project and investment manager. Funds will be used in construction only and past dues will be addressed separately.
Lenders– Initially Rs. 10,000 cr will be provided by govt. and SBICAP will monitor it. Further SBICAP and LIC Housing Finance will invest Rs. 15,000 cr. Depending on the requirement of funds, more financial institutions will join the pool. Detailed Investment Guidelines of the fund will be issued by SBICAP.
Positive Net worth– Govt. will provide fund to those housing projects which are financially viable. Means their income after final completion must be more than cost of construction. It means allotted funds will be used only for construction but not for pending dues. Also concerned investor will liable to collect benefits after sales.
Housing units– Govt. has put cap on project size and housing units under this fund allocation. Govt. will not invest more than Rs. 400 cr in a housing project. Also govt. will put a cap on amount to be given. Adding further govt. will provide fund to units up to 200 sq mt or 2150 sq ft of carpet area. Housing units up to Rs. 2 cr in Mumbai, Rs. 1.5 cr in Delhi NCR, Kolkata, Bangalore, Chennai, Hyderabad, Pune, Ahemdabad and Rs. 1 cr in other cities will be part of revival.
Non NPA and NCLT projects– Most of the stalled projects are now NPA or in NCLT. Due to fund crisis, developers could not complete projects and so on they missed deadline of financial creditors. Hence such projects are dragged by creditors in arbitration and now in category of non-performing assets. Such projects will be liable to get funds to save them from liquidation. But if the project is under liquidation then govt. will not allow funds to project.
Under trial projects– Apart from project in liquidation, if any stalled housing project is under jurisdiction of SC and HC then funds will not be available for them. This is a big setback for home buyers of Amrapali, Unitech and Jaypee because almost 1 lakh home buyers will not get any benefit from this AIF. So 1 lakh units are still untouched from this fund and need special attention.
Hari Om Dixit, Director, Gayatri Group says, “this decision would have save many housing projects but it’s never too late. I feel that debt free housing projects must be considered first because they don’t have any liability of financial institution and after construction they can generate good revenue too. It is matter of coincidence that most of the projects are affordable and mid income category.”
Suresh Garg, CMD, Nirala World says, “stalled housing projects are highly discouraging for new investors, a challenge for real estate and need fresh funds to achieve completion. Since govt. yet to access net worth of housing projects, Rs. 25,000 cr may not serve the purpose but this is very good step of govt. to break monotony of sector.”