ET Explains: A lowdown on government’s Rs 25,000 crore realty booster shot


The government has announced the creation of an Alternate Investment Fund (AIF) with a targeted corpus of Rs 25,000 crore for the completion of stalled housing projects. The government would inject Rs 10,000 crore in the fund and institutions like the SBI and the LIC will come up with the rest to take the corpus to Rs 25,000 crore.

Sovereign funds and pension funds will be allowed to invest in the category II AIF, which the government hopes may take the corpus even higher.

What is the fund about?

The fund’s objective is to address the concerns of distressed homebuyers who have paid an initial amount to builders but due to various reasons haven’t received their apartments/flats. The fund aims to finish such housing units in a time-bound manner.

The decision to set up the fund was taken after the Finance minister met with all the stakeholders including the homebuyers. The fund, created in September, is expected to gather steam now after two important conditions that impeded the success of the scheme have been done away with.

What are those two conditions?

When the fund was announced in September, the government said that only those projects which haven’t been categorised as NPAs and are 60 per cent complete can access the fund. In Wednesday’s announcement, the government waived of these two conditions and allowed projects classified as bad debts by banks and also the ones which are at various stages of completion to access the funds.

The only condition that has been kept is that the project should be net worth positive and RERA registered.

How big is the problem?

According to the finance ministry’s estimate, there are a total of 1,600 stalled housing projects comprising 4.58 lakh housing units that need immediate help.

The government has identified housing units up to Rs 2 crore in Mumbai, and Rs 1.5 crore in Delhi-NCR, Chennai, Kolkata, Bengaluru and Pune as the ones which can avail the facility.

Why an AIF?

The Alternate Investment Fund offers an opportunity to high net worth individuals and large sovereign funds/pension funds to take part in the distressed assets/real estate projects that have been at various stages of completion. The money will be pooled in the AIF and will be used for timely completion of these projects. The money will be put into an escrow account to be managed by SBI Caps.

How will it help a slowing economy?

The Rs 25,000-crore booster for affordable and middle housing projects will immediately trigger demand for labour, cement and steel — sectors that have been reeling under the impact of a slowing economy — as they are directly linked with construction.

These core sectors have traditionally been major job creators. The realty fund will speed up the completion of the stalled housing projects, thereby sparking demand in the allied sectors — such as transport — as well.

What do analysts think?

One view is that Rs 25,000 crore does not appear big or ambitious or enough when one looks at the size of the problem.

Also, the stated condition that “only the projects that have a positive net worth would be eligible” appears problematic to some experts, because it straightaway makes a large number of projects ineligible.

As per this view, the ideal way is to utilise the fund to buy out stalled housing projects, and complete them without their promoters. And ET Editorial contends that “the point is not to worry about promoters but to focus on getting the projects completed”.


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