The Central government recently announced to set-up an alternative investment fund (AIF) to pull out the real estate sector from the crisis. Besides an amount of Rs 10,000 crore given by the government, Life Insurance Company (LIC) and State Bank of India (SBI) are also to contribute towards AIF which is expected to reach Rs 25,000 crore in total.
In a recent interview the Vice Chairman and Managing Director of Indiabulls Housing Finance, Gagan Banga said that “Both financially as well as sentimentally it’s a very positive development though the outcome of this would be more visible in probably the fourth quarter of the financial year.”
He also added that “It’s an idea which has been floating around for quite a long time getting into implementation mode. It may take a few months for a fund to get set up and the money to start flowing, but directionally both lenders and developers know that the government is thinking about how to de-clog the whole real estate sector.”
As per the recent government data, there are over 1,600 stalled housing projects mounting over 4.5 lakh units in India. As per the reports, the projects which cost less than Rs 2 crore in case of Mumbai, Rs 1.5 crore in Delhi, Pune, Hyderabad and Kolkata and Rs 1 crore in case of all other cities will only be considered for funding under the AIF.
CREDAI chairman Jaxay Shah stated, “It’s a very welcome change from the initial announcement (of September 14). Now the only criteria for eligibility is net worth positive projects.” He also added, “We are certain that a majority of stuck homebuyers will benefit from the announcement of a Rs 25,000 crore stress fund which is going to be increased in value if needed.”
The fund sanctioned under AIF will be transferred to escrow account for the stalled projects. The money will then be released as per the assessment and progress of construction.