Major Relief for Real Estate and Homebuyers

Union Finance Minister Nirmala Sitharaman on Tuesday said that the real estate division needs the government’s consideration and the Centre is working with the Reserve Bank of India (RBI) towards tweaking the existing laws to create them conducive for the segment. Nirmala Sitharaman told media people amid the silver jubilee celebrations of the National Stock Trade (NSE) that the sluggishness in the sector needs to be addressed there are alternative funds approaching.

She added saying that there are many sovereign funds interested in the real estate sector who want to work with the government. There are numerous alternative funds which are drawing closer as long as there’s a few supporting components available for restoring the stressed realty sector.

To bring alleviation to the realty division, FM reported that an INR 10,000 crore support has got the Union Cabinet gesture. To be utilized for last-mile financing of stuck reasonable and mid-segment projects, it’s an imperative move that dispenses with the uncertainty surrounding the timelines for setting up funds and its real execution. Endless distressed homebuyers are waiting to see the light at the end of the tunnel.

Investments from LIC, SBI will take to nearly INR 25,000 crore

Moreover, the extraordinary window will get ventures from institutions like LIC, SBI, and others which can take the corpus to about INR 25,000 crore. The finance will too be open to other autonomous stores to include to the corpus. Several NPA projects and those confronting liquidation procedures under NCLT should moreover be included provided they are not referred for liquidation. This will bring more stalled projects into the eligibility criteria and give relief to distressed homebuyers.

As per ANAROCK data, a total of 5.76 lakh units (launched in 2013 or before) over budget segments are stuck in different stages of non-completion in the top 7 cities.

City Total delayed Units (launched before or during 2013) Approx. Value (In Cr) of projects running behind schedule (launched before or during 2013)
Bengaluru 39,000 ₹ 28,000
Chennai 10,000 ₹ 6,500
Hyderabad 8,900 ₹ 5,500
Kolkata 13,000 ₹ 7,300
MMR 2,10,000 ₹ 2,34,000
NCR 2,00,000 ₹ 1,26,000
Pune 95,000 ₹ 57,000
Total 5,75,900 ₹ 4,64,300

Top-Notch Realty Experts Perspective on FM’s Announcement

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, said Dr. Niranjan Hiranandani, MD, Hiranandani Group and National President – NAREDCO. He added, “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.”

Rohinton Sidhwa, Partner, Deloitte India said, “The AIF 2 structure is a pass through for tax purposes, the fund does not pay tax on its investment income and hence will facilitate the financing activities in a tax efficient manner.”

Sharad Mittal, CEO & Head, Motilal Oswal Real Estate Funds

“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 needs to see the modalities on implementation, time is of essence in delayed projects.”

NAREDCO Vice Chairman & CMD Tulip Infratech Mr Parveen Jain says, “The scheme of AIF (Alternative Investment Fund) along with investments from various institutions amounting to huge corpus which shall be put in an escrow account is an outstanding step which shall prove to be a big boon and relief for the Real Estate sector.’

Jaxay Shah, CREDAI National Chairman said, “It’s a very welcome change from the initial announcement. We are certain that a majority of stuck homebuyers will benefit from the announcement of a 25000 crore stress fund which is going to be increased in value if needed. Quick deployment of money and efficient decision making for qualification of projects will solve the long-pending problems of home buyers. The establishment of an alternative investment fund is also welcoming.”

Finance Minister on Real Estate Sector by Mr. Shishir Baijal, Chairman & Managing Director, Knight Frank India “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.”

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