Govt caps funding for single stalled realty projects at ₹400 crore

Union Finance Ministry on Thursday said that any stalled real estate project will get maximum of ₹400 crore from special fund. Also, dwelling unit with size less than 200 square metres only will get the finance for completion

The Government has announced setting up a dedicated fund to provide relief to home buyers. As approved by the Union Cabinet on Wednesday, 'Special Window' fund will get ₹10,000 crore and with the contribution from SBI, LIC and other financial institutions, initial corpus is estimated to be ₹25,000 crore. Later, many sovereign funds, pension funds and other global funds beside domestic financial institutions are expected to put money to expand the corpus.

On Thursday, the Finance Ministry came out with answers to Frequently Asked Questions (FAQs), where it has given finer points of the scheme. It has been said that the fund will invest in any project that meets its investment objective of completing housing units with size less than 200 sq mts and the city-wise pricing norms subject to a cap of rupees two crores.

As per industry estimates, in the stalled category, there are about 1,509 housing projects comprising of approximately 4.58 lakh housing units. Projects meeting the investment eligibility criteria will be financed. The maximum finance for any single project will be ₹ 400 crore. There will be caps put in place for a single developer and for any single city as well as part of the final detailed scheme.

The focus of the Window is on mid and affordable segment. However, alleviating the stress for the developers in this segment may have indirect collateral benefits for the entire real estate sector including luxury segment. The objective here is to complete the construction of the stalled projects at the earliest. Accordingly, funding would be structured to meet the construction and sales schedule of the relevant projects. As part of the investment review, the Investment Manager will take a call if there is any need to change the developer for the project.

The Ministry has made it clear that any or all projects undergoing corporate insolvency resolution process before the NCLT (National Company Law Tribunal) can be considered for funding through the Special Window up to the stage where the resolution plan for such insolvency resolution process has not been approved/rejected by the committee of creditors.

However, the fund will not invest in cases which are pending before the High Courts and the Supreme Court. The focus of this Special Window will be on the projects that are stalled for lack of construction funding. It will also look at projects that are NPAs (non performing assets) or undergoing NCLT proceedings that can commence construction immediately after funds are made available.

The Finance Ministry on the question about how the Government will ensure that the selected developer is not alleged for fraud or misappropriation of funds and that the funds are not being cornered by a small group of developers/promoters, answered that project and developer selection shall be the prerogative of the Investment Manager and the Investment Committee of the fund.

It has been clarified that the investors including the Government will not be interfering with the financial objectivity of that process. The decision of the Investment Committee shall be guided by the investment objective of the fund as agreed in the contribution agreement entered into with the investors. Projects involving fraud or diversion may not be considered by the Fund, the Ministry said.

Houses, not yet

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