Rs 25,000 cr Fund: Which stalled housing projects will qualify? Check list of points

The Centre gave over 4 lakh homebuyers, whose housing projects are stuck, a reason to cheer on Wednesday as FM Nirmala Sitharaman announced a special alternative investment fund (AIF) of Rs 25,000 crore with participation from state-run LIC and the State Bank of India (SBI). The decision to create the AIF and restart stalled housing projects was taken in a Cabinet meeting headed by PM Narendra Modi. AIF will have an initial investment of Rs 10,000 crore from the Centre, while the rest will be invested by the Life Insurance Corp (LIC) and the STate Bank of India (SBI). However, there was no clarity about which projects qualify, but now more information is available on this critical aspect. 

The move is expected to start the revival of real estate sector as well the Indian economy while restoring the homebuyers sentiment as well as delivering homes to buyers who have already paid the money and have been running from pillar to post in an attempt to get builders to deliver their dream homes, but to no avail. "This step will also lift buyers’ sentiments and help builders get more and more prospective buyers. More buyers will buy these projects since a government fund is attached to them when in today’s scenario, customers do not want to buy from a project unless it is 100% complete. The move is also expected to generate employment for unskilled labourers and have a cascading impact on other allied industries such as steel, cement, transport etc. Overall, it is a positive step for the sector and will give the right stimulus to a sector which was surrounded by negativity," Pavan Gupta, CEO, Muthoot Housing Finance Limited explained.

However, certain aspects will be looked into before the funds are to be provided for those projects. Sitharaman had said that the AIF will aid in completing 1,600 stalled projects across the country that will benefit about 4.58 lakh homebuyers. She said that to make the scheme effective the size of the fund would be scaled up constantly and sovereign wealth funds, pension funds may also join the AIF later.

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Which stalled housing projects qualify?

To receive these funds, the projects must have -

1. Stalled for lack of adequate funds

2. Affordable and middle-income category

3. Net worth positive projects (including NPAs and projects undergoing NCLT proceedings)

4. RERA registered

Also, the government has announced that priority will be given to projects very close to completion. It has decided to increase the scope of investments to include NPA as well as NCLT projects. All applications for financing would be reviewed by the investment committee of the fund for approval, after due-diligence and discussions with existing lenders and legal advisors.

Who all qualify for affordable and mid-income housing project?

This will include projects where housing units do not exceed 200 sq. m. RERA carpet area and are priced as below:

Up to or less than Rs 2 crore in Mumbai Metropolitan Region

Up to or less than Rs 1.5 crore in National Capital Region, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad

Up to or less than Rs 1 crore in the rest of India.

This price does not include the additional charges like social amenities, parking, housing society, brokerage, deposits, registration and stamp duty charges. Also, the carpet area includes the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area. It does not include the area covered by the internal partition walls of the apartment.

"Earlier, projects declared as non-performing assets and those which are under National Company Law Tribunal (NCLT) were excluded from getting finance from this fund. Since the scope of the fund has increased, this will provide a big relief to stalled projects. Many viable real estate projects were stuck due to the liquidity crunch, lesser sales, customers not buying under-construction properties and hence many builders with the right intentions went into trouble," Gupta said.