The government on Wednesday approved a Rs 25,000 crore fund to help complete over 1,600 stalled housing projects, including ones that have been declared NPAs or admitted for insolvency proceedings, as it looks to boost growth by steering consumption in real estate and associated sectors.
The move is likely to help 4.59 lakh housing units across the country.
Continuing with steps she began announcing within a month of Parliament approving her maiden Budget, Finance Minister Nirmala Sitharaman said the Alternative Investment Fund (AIF) will comprise Rs 10,000 crore coming from the government and the remaining being provided by state insurer LIC and the country's largest lender SBI.
The minister also said several sovereign funds have shown interest and may join the scheme at a later stage.
Meanwhile, sources said about Rs 3.5 lakh crore has been invested in the over 1,600 stalled projects, and investment of Rs 55,000 crore to Rs 80,000 crore would be needed to complete them.
The fund, to be set up as Category-II AIF registered with SEBI, will be managed by SBICAP Ventures Limited.
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The AIF, which was first announced by Sitharaman on September 14, will act as a 'special window' to provide loans to over 1,600 incomplete affordable and middle-lower income housing projects.
In all, 4.58 lakh housing units are being targeted to be completed with a view to generate employment as well as revive demand of cement, iron and steel industries.
Sitharaman said the scheme, approved by the Union Cabinet headed by Prime Minister Narendra Modi, is a modified version of the September 14 plan.
"Government's intention is completion of housing projects," the minister said after the Cabinet meeting.
She further said meetings were held with homebuyers, associations, banks and RBI during the past few months and it was decided to modify the scheme by including even those projects which have been declared non-performing assets (NPAs) by lenders, and also those which have been dragged to the NCLT for insolvency proceedings.
She, however, said only RERA-registered projects with positive networth will be provided funds.
The AIF funds will be released in stages through an escrow account and will be contingent upon completion of the approved phase, she said, adding the size of the fund may be increased with the participation of sovereign and pension funds.
Sitharaman said the government is seized of the problem faced by homebuyers who are forced to pay EMIs on loans taken for buying homes but have not yet got possession and continue to shell out both loan installments and rent.
She also said the Reserve Bank of India would be soon coming out with a clarificatory note on the scheme.
Meanwhile, real estate developers' association CREDAI welcomed the move saying, it will solve the long-pending problem of homebuyers.
"It's a very welcome change from the initial announcement (of September 14). Now the only criteria for eligibility is networth positive projects... this will ensure that the fund is actually deployed to complete incomplete projects which are even NPA or also in NCLT.
"We are certain that a majority of stuck homebuyers will benefit from the announcement of a Rs 25,000 crore stress fund which is going to be increased in value if needed," CREDAI Chairman Jaxay Shah said.
Quick deployment of money and efficient decision making for qualification of projects will solve the long pending problems of homebuyers, he said.
Property brokerage firm Anarock's Chairman Anuj Puri said the move will bring huge relief to stuck homebuyers and boost sentiment in the sector which is facing a demand slowdown.