Govt looks to realty to revive economic activity

Finance minister Nirmala Sitharaman on Saturday said the government has proposed to create a “special window” to “provide last mile funding for housing projects which are non-NPA and non-NCLT projects and are net worth positive in affordable and middle income category”.

While the government will contribute Rs10,000 crore towards the special window, Sitaraman said, other investors like LIC and sovereign funds will invest “roughly same amount” to take the corpus to Rs20,000 crore.

She also announced that government servants, who contribute big time in housing demand, will get home loan at lower rates. To boost housing demand, the interest rate on ‘House Building Advance’ for government employees would be lowered and linked with the yield on 10-year government securities.

Government servants contribute to a major component of demand for houses. This will encourage more government servants to buy new houses, the finance minister said.

An estimated 8.5 lakh home buyers are yet to get delivery of their units as hundreds of projects under the PM Awas Yojana across the country are delayed due to liquidity crunch and demand slowdown.

The new financing facility will give relief to only about 3.5 lakh of the 8.5 home buyers as projects of major developers like Amrapali, Jaypee Infratech, Unitech are either facing bankruptcy or have been declared NPAs by lenders.

However, Sitharaman said, the insolvency proceedings have started in these projects and the issue will be resolved under the Insolvency and Bankruptcy Code (IBC).

In any way since home buyers have already been made financial creditor under the IBC, they will get their due, she said.

“The objective (of this fund) is to focus on construction of unfinished units. The government, on the lines of NIIF, can contribute to the fund while rest of the investors would be LIC and other institutions and Private capital from banks/sovereign funds/DFIs (development financial institutions) etc,” she said.

The finance minister also said the fund would be set up as a Category – II AIF trust and will be professionally run with experts from housing and banking sector.

Sitharaman said the eligible builders can seek funding from this special window.

A report by JLL India last month said as many as 2,18,367 housing units valued at Rs1,55,804 crore are delayed at various stages of construction cities such as Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Pune.

Besides stressed assets fund, the government announced the relaxation of ECB (external commercial borrowing) guidelines for affordable housing to facilitate financing of home buyers who are eligible under the PMAY (Pradhan Mantri Awas Yojana), in consultation with the Reserve Bank of India.