Nirmala Sitharaman, the Union finance minister recently informed about the creation of a special window provision for the real estate sector. This decision is taken after the Government discussed the issue with RBI [Reserve Bank of India] and was FM was quoted saying, they has initiated sustainable solutions to the homebuyers and plan to complete the stalled projects at the earliest to maximize benefit to the buyers.
The government also decided to form a Category-II Alternative Investments Fund (AIF) of approximately Rs. 25,000 crore to begin with. Under this, the Government will provide nearly Rs. 10,000 crore and financial aid will be offered to the stalled projects registered under the RERA Act with good net worth, Nirmala Sitharaman said.
She further said that there are more than 1,500 stalled projects across the country under which over 4.50 lakh residential units are incomplete and this assistance will be of great help to them. But the affordable homes will only be benefitted and the price bracket for the same is yet to be decided. Sitharaman also said that the same had been discussed with SBI, LIC and others for participation in Alternative Investments Fund [AIF] and this is only an initial investment. After this, various sovereign funds who have shown interest in this will be taken on-board.
AIF will be monitored by a professional body and the same will also sanction amount once the assessment of the project and construction status gets completed. The Finance Minister was quoted saying, that the entire amount will not go in the escrow account in one shot but the amount will be released in a phase-wise manner according to the construction status.
However, Sitharaman cleared that the net worth positive project/tower is different from the net worth positive company. For example, a firm’s financial status is not considered in case a project has three towers and the construction of the first tower is completed 70%, second tower is completed till 50% and the construction of the third tower is yet to be commenced. In this scenario, the funds will be sanctioned for the first tower, probably for the second tower but the same will not be released for the construction of the third and last tower.
The proposal has received a go-ahead from the cabinet and it has been said that the projects declared as non-performing association (NPA) or are listed in NCLT can also avail the benefit of this scheme.
But, FM clearly said that they will only consider the projects that are under NCLT but not have declared liquidated yet.
She also said that the Reserve Bank of India will soon table a clarification note about the mechanism for projects declared NPA or in NCLT. Sitharaman also informed about the discussion held with RBI and other banks for drawing a workable proposition that will be brought to light soon.