Know if the home that you are waiting for can avail money from Indian government's new fund for stuck housing projects
- The Narendra Modi government has unveiled a ₹25,000 crore (about $3.5 billion) rescue fund for housing projects that are stuck for cash.
- Aggrieved home buyers waiting anxiously for their homes to be delivered will breathe a sigh of relief.
- However, there are filters and thresholds in place to decide which builder can get this aid and which ones can't.
Aggrieved home buyers waiting anxiously for their homes to be delivered will breathe a sigh of relief. "There are over 1.600 housing projects, and 4.58 lakh housing units, that are stalled,"
The financial support for builders will be structured as an alternative investment fund (AIF) to be managed by SBI Cap.
Here's how the process will work:
1. Bankers and experts will evaluate the progress in the real estate project seeking support from the fund.
2. This fund will be available to all builders where the liquidation has not been ordered by the National Company Law Tribual (NCLT). Even defaulters, where the banks have termed the loans as non-performing asset (NPA), will be eligible to seek support.
3. However, the project must have a positive net worth. This will depend on the demand for the project and expected cash flow from home buyers.
4. Therefore, the government has set a threshold. Only projects that are 70% complete can avail this support. "If there are three towers in a project, and one of them is 70% is complete, and the other two haven't started yet. The money will be available only for the tower that is 70% complete not for the other two," Sitharaman explained.
5. There will also be pricing limit for eligible projects. For example, housing units which are priced under ₹2 crore in Mumbai Metropolitan Region, ₹1.5 crore in the National Capital Region, and ₹1 crore in other cities, will be eligible for this fund.
6. The fund provided to developers will be kept in an escrow account— the money cannot be used by the builder for anything other than the construction of the project itself, nor can the bank use the money to recover earlier dues.
7. For instance, if the project needs ₹400 crore for completion, the money will be released to the escrow account based on milestones in completion.
8. Projects like the one from Jaypee Group and Amrapali Group where the state-owned NBCC has been roped into complete the projects will not get money from this fund.
9. Finance Minister Nirmala Sitharaman also said that the government is inviting other foreign funds and sovereign funds to invest in the fund, over and above the initial ₹25,000 crore from the government of India, SBI and LIC.
Indian government unveils $3.5 billion rescue fund for stuck housing projects