The real estate sector has reacted positively to the announcement.
Realty players have termed the Centre's move to set up the 'Special Window' fund to provide priority debt financing for the completion of stalled housing projects in the affordable and middle-income housing sector.
Finance Minister Nirmala Sitharaman on Wednesday announced that an Alternative Investment Fund (AIF) of Rs 25,000 crore will be set up in which the government will contribute Rs 10,000 crore.
Addressing a press conference after the meeting of the Union Cabinet, Sitharaman said the Cabinet has approved the establishment of 'Special Window' for an estimated 1600 housing projects that are currently stalled.
Life Insurance Corporation and State Bank of India (SBI) will infuse rest of the amount, Sitharaman said. The fund will be open to other sovereign funds to add to the corpus, Sitharaman added.
Here is how the real estate sector has reacted to the announcement:
1. Win-win for home buyers and real estate developers'
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In a statement, Dr Niranjan Hiranandani, NAREDCO President said, “The vexed problem of delayed and stalled real estate projects appears to have found a solution, with the Hon’ble Finance Minister announcing Cabinet Approval of the scheme to provide ‘last mile funding’ for such projects, which she had proposed earlier. The funds will be used to provide priority debt financing for the completion of stalled housing projects in the Affordable and Middle-Income Housing sector, providing relief to developers with unfinished projects as also ensuring delivery of homes to buyers.”
“If the developer has not declared liquidation, they can avail the cover, the Hon’ble Finance Minister said. “This will be a win-win for home buyers and real estate developers, as it will help alleviate financial stress faced by homebuyers who have invested their hard-earned money, while also releasing funds stuck in such delayed/ stalled projects for productive purposes,” the Hiranandani Group MD said.
“The fund will help nearly 1,600 stalled housing projects in the country, and it is positive that the aspect of NCLT/ NPA will not be a stumbling block to prevent stalled and delayed projects from approaching the fund,” he added.
“Positive impact of the move include generation of employment, revival of demand for cement, iron and steel industries and relieve stress in other major sectors of the economy,” he further said.
“The announcement that State Bank of India (SBI) and Life Insurance Corporation of India, sovereign and pension funds would also contribute to the fund, is welcome,” he said, adding that the announcement will prove to be a win-win for both, home buyers as also real estate developers – “but the devil in the detail in this case will be quick implementation”.
2. 'Positive Move'
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Mr Sharad Mittal, CEO & Head of Motilal Oswal Real Estate Funds, said, "It's a positive move for the liquidity starved real estate sector. Rs 25,000 crore will be good amount to address the chronic situations". Though one need to see the modalities on implementation, time is of essence in delayed projects."
3. 'Welcome Step'
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Shishir Baijal, Chairman & Managing Director of Knight Frank India said this is a "welcome step and will assist the reeling real estate sector gain momentum."
“The inclusion of developments under NPAs and NCLT into the gamut of eligible projects, albeit these are net positive projects, into the Special Window Funding is a welcomed decision. The extension of this benefit to mid income beyond the affordable housing segment is a critical step forward. We welcome these changes and feel that this will help create greater momentum in stock movement. There are many projects which are near completion but have not been able to garner last mile funds will benefit from this move. This step will definitely create greater confidence and credibility and may, in due course, encourage private segments to extend their support in last mile funding ,helping the beleaguered sector to go over this period of slowdown”.
4. 'Special Window' Fund
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The Union Cabinet chaired by Prime Minister Narendra Modi has approved the establishment of a 'Special Window' fund with an initial infusion of Rs 10,000 by the government.
The Alternative Investment Fund (AIF) of Rs 25,000 crore will be set up in which the government will contribute Rs 10,000 crore. Life Insurance Corporation and State Bank of India (SBI) will infuse rest of the amount, Sitharaman said. The fund will be open to other sovereign funds to add to the corpus, Sitharaman added.
5. Highlights of Nirmala Sitharaman's announcement
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* The government will act as a sponsor and total funds committed by the government would be up to Rs 10,000 crores. Funds will be set up as Category-II Alternate Investment Fund (AIFs) registered with Securities and Exchange Board of India (SEBI).
* Life Insurance Corporation and State Bank of India (SBI) will infuse rest of the amount, Sitharaman said. The fund will be open to other sovereign funds to add to the corpus, Sitharaman added.
* Criteria for projects: Net-worth positive; affordable and middle-income housing project; on-going projects registered with RERA; reference by existing lender; will include stressed projects classified as NPA and those in NCLT," she added.
* The Finance Minister said the corpus will be used to complete housing units worth less than Rs 2 crore in Mumbai, Rs 1.5 crore in Delhi-NCR, Chennai and other metros and Rs 1 crore in other cities.
* For the first AIF under the Special Window, it is proposed that SBICAP will be engaged as the Investment Manager, the government said in a press release.
* "This fund would in turn would provide relief to developers that require funding to complete a set of unfinished projects and consequently ensure delivery of homes to the home-buyers," it said.
* "Since the real estate industry is intrinsically linked with several other industries, growth in this sector will have a positive effect in releasing stress in other major sectors of the Indian economy as well," the government added.
