Government Plans Rs 25,000-Crore Alternative Investment Fund To Revive Stalled Housing Projects Across The Country

The government has proposed an alternative investment fund (AIF) worth Rs 25,000 crore to provide last-mile funding to stalled projects across the country.

There are about 1,600 stalled housing projects, consisting of about 458,000 units, across the country, according to the government.

Once the AIF begins disbursing funds, construction in stalled projects will resume, which will boost confidence in the real estate market, experts have opined.

SBICAP Ventures Ltd may be engaged as the investment manager for the first AIF. After assessing the financial position of various projects, the investment manager (SBICAP Ventures Ltd) would provide funds enabling stalled projects to complete construction and deliver homes to buyers.

However, the fund will not get released to developers in one go. Instead, the allocated fund will get transferred to a special escrow account and will be disbursed in accordance with the progress in construction.

According to the union finance ministry, a special window is being structured as an AIF to pool investments from other government-related and private investors including public financial institutions, sovereign wealth funds, public and private banks, domestic pension and provident funds, global pension funds and other institutional investors and so on. The fund is, therefore, expected not only to support the sector but also generate commercial returns for its investors.

The government’s relief package announced in September had promised to benefit only a handful of aggrieved buyers since it was only meant for projects in the affordable and middle-income categories which had not been declared as non-performing assets (NPAs) and did not have a pending case of insolvency against them in the National Company Law Tribunal (NCLT).

The current announcement removes the caveats, besides bringing in clarity on the size and price of units that will get benefited—housing units not exceeding 200 square meters (carpet area) and city-wise pricing cap of up to Rs 2 crore. This is expected to cover and revive 80% of stalled projects, irrespective of their stage of construction, regardless of whether there are cases in the NCLT or they have been declared as non-performing assets (NPAs).

The government has widened the scope of projects that are eligible for funding to include those that have been declared NPA and are undergoing insolvency proceedings under NCLT, but have not gone under liquidation.

The projects need to be net worth positive to be able to avail the benefit. Net worth positive projects are those where the value of the receivables plus the value of the unsold inventory is greater than the completion cost and outstanding liabilities of the project.

To avail the benefit, projects need to be registered under the Real Estate (Regulation and Development) Act (RERA), 2016.

Though all affordable and mid-income projects registered under RERA are eligible for the benefit, provided they fulfill certain conditions, the government has set a value as well as the size limit for the projects.

The size of the houses shouldn’t be more than 200 square meters (approximately 2,000 square feet) in terms of carpet area. Also, the cost of a single unit can be up to Rs 2 crore in the Mumbai Metropolitan Region (MMR), Rs 1.5 crore in the National Capital Region, Chennai, Kolkata, Hyderabad, Bengaluru and Ahmedabad, and up to Rs 1 crore, in other cities.