Nirmala Sitharaman: Homebuyers, developers cheer stress fund cabinet nod; reiterate timeline, execution crucial

Mumbai: Real estate developers and homebuuers welcomed the Cabinet’s decision to expand the proposed stress fund for the sector to Rs 25,000-crore, but said a lot would depend on how the government executes the scheme and the timelines for the disbursal of the money.

The special funding window is expected to now accommodate more stalled projects as the eligibility criteria has also been relaxed to cover even projects that are classified as non-performing assets by lenders and those that are facing bankruptcy proceedings at the National Company Law Tribunal (NCLT), provided they are not referred for liquidation. This will provide relief to more than 4.5 lakh homebuyers as against the government’s earlier estimate of 3.5 lakh homebuyers, they said.

While Wednesday’s decision takes it closer to the execution of the funding window, which was initially announced in September with a proposed Rs 20,000 crore fund, realty developers and industry experts believe the timeline and actual infusion of funds into the projects held the key to the revival of the sector.

“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,” said Niranjan Hiranandani, the national president of Naredco, a developers’ body. “But the devil in the detail in this case will be quick implementation.”

In September, the government announced the plan to provide last-mile financing to affordable and middle-income housing projects. But to get funding, as per the proposal then, these projects should not be an NPA or facing bankruptcy proceedings. They were also required to have a positive net worth.

“The delay in the on-ground deployment of the stress fund gave rise to severe apprehensions about the main issues — that of stuck and delayed projects — that had remained unaddressed so far. The timeline for setting up this fund and its actual implementation is quite critical,” said Anuj Puri, the chairman of ANAROCK Property Consultants.

According to ANAROCK data, 5.76 lakh units launched in 2013 or before across budget segments are stuck in various stages of non-completion in the top seven Indian cities.

Although homebuyers also cheered the decision, they are concerned about the quick implementation and end usage of the funds.

“We are keen to see the construction activity starting immediately. Names of the identified 1,600 projects that will receive funds need to be disclosed so that the homebuyers of those projects get a sigh of relief,” said Abhay Upadhyay, the president of the Forum for Peoples Collective Efforts (FPCE), a homebuyers’ body that has been pushing for a stress fund since the beginning of this year. “The government needs to ensure that the funds are not directly disbursed to builders as they cannot be trusted with this,” he said. “It would have been good to have involved homebuyers in this process.”

He demanded that a committee of homebuyers from the respective stuck projects be formed to monitor the progress of the work to be undertaken through these funds.

As the sponsor of the fund, the government will infuse up to Rs 10,000 crore into a category-II Alternate Investment Fund (AIF) registered with the capital market regulator. For the first AIF under the special window, it is proposed that SBICAP Ventures Ltd be engaged as the investment manager. The fund will get investments from institutions like LIC, SBI and others, taking the corpus to nearly Rs 25,000 crore.

“There is probably recognition that there are several projects available that can be viable provided there is completion funding. The AIF-II structure is a passthrough 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,” Deloitte India partner Rohinton Sidhwa said.

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