Government Announces Rs 20,000 Crores For Stalled Housing Projects; benefit to 3.5 lakh home-buyers

The Government came to the rescue of 3.5 lakh distressed home-buyers by announcing Rs 20,000 crore fund to help real estate developers complete projects that are stuck on account of “last mile” cash shortage.

Finance Minister Nirmala Sitharaman announced six steps to boost exports including Dubai-like mega annual shopping festival from next year, new automatic refund system for exporters from next month and new RoDTEP scheme on export duties.

Sitharaman said a “special window” will be set up to provide last mile funding for housing projects which are neither Non Performing Assets (NPA) nor National Company Law Tribunal (NCLT) projects and are net worth positive in affordable and middle income category. She said that Rs. 10,000 crore towards the special window will come from the government and “roughly same amount” from outside investors and sovereign funds. She also announced that government servants, who contribute big time in housing demand, will get home loan at lower rates.

To encourage government servants to buy new houses, the interest rates on House Building Advance will be lowered and linked with 10-year G-sec yields.

Approximately 8.5 lakh home buyers are yet to get delivery of their units as hundreds of projects across the country are delayed due to liquidity crunch and demand slowdown. However, this scheme is set to give relief to only about 3.5 lakh home buyers as projects of developers like Amrapali, Jaypee Infratech, Unitech and host of others are either facing bankruptcy or have been declared NPAs by lenders.

The objective of this fund shall be to focus on construction of unfinished units. The Government, on the lines of National Investment and Infrastructure Fund (NIIF), can contribute to the fund while rest of the investors would be Life Insurance Corporation (LIC) and other institutions and Private capital from banks/sovereign funds/DFIs (Development Financial Institutions) etc.

According to the Finance Minister, the fund would be set up as a Category – II (Alternative Investment Funds) AIF trust and will be professionally run with experts from housing and banking sector. She also added that the eligible builders can seek funding from this special window.

Besides stressed assets fund, the Government announced the relaxation of ECB (External Commercial Borrowing) guidelines for affordable housing to facilitate financing of home buyers who are eligible under the PMAY (Pradhan Mantri Awas Yojana), in consultation with the Reserve Bank of India.

According to Finance Minister, Government servants contribute to a major component of demand for houses. This will encourage more Government servants to buy new houses.