Extending a lifeline to stalled housing projects in the country, the government has announced the setting up of a Rs 25,000-crore alternative investment fund (AIF), in a bid to re-establish normalcy in the real estate and allied sectors. The fund is likely to help over 4.58 lakh units across 1,509 projects reach completion, once allocation starts.
Q: What is the eligibility criterion, for projects to get money under the AIF?
A: For a project to receive money from the AIF, it has to meet several conditions, including monetary limits and scale of delay.
Projects that are RERA-registered: First of all, the project must be registered with the state real estate regulatory authority.
Projects meant for middle and low-income groups: The window is meant only for middle and low-budget homes. For that purpose, the per unit price limit has been kept at up to Rs 2 crores in the Mumbai market, up to Rs 1.5 crores in the National Capital Region, Chennai, Kolkata, Pune, Hyderabad, Bengaluru and Ahmedabad and up to Rs 1 crore in the remaining parts of the country. For the same purpose, the carpet area per unit has been restricted at 200 sq metres.
Projects that are net-worth positive: The project must be net-worth positive. This means the completion cost and outstanding liabilities of these projects should not exceed the worth of the receivables and the unsold inventory in these projects. Projects that are stuck in the National Company Law Tribunal over solvency issues or have been declared non-performing assets, can also seek funds, if they happen to be net-worth positive.
Projects with no litigation: Projects that are caught in litigation in the high court or apex court, however, will not be considered under the AIF.
Projects close to completion: The government memorandum also mentions that for a project to get funds, it should be ‘very close’ to completion. It also specifies that liquidity will be offered, only to those projects where the delay is caused by scarcity of money.
Q: How much funding can a single project get?
A: This limit has been capped at Rs 400 crores.
Q: How much time would be allotted for completion of a project, once the fund is distributed?
A: The answer to that is, ‘at the earliest’. To make that happen, the fund managing agency will be involved at every step, from reviewing the project to deciding if the current builder needs replacement, for the sake of completing the project.
Q: Who will manage the AIF?
A: SBI Caps has been selected to manage the fund.
Q: Which cities will benefit the most from the fund?
A: The Mumbai region could derive the maximum benefit from the fund, followed by the NCR market. According to an analysis that includes 10 prime residential markets of the country, as many as 1,665 RERA-registered housing projects are delayed by over five years across India and are likely to see completion only after 2020. Of these, 880 projects, constituting over two lakh units, are concentrated in the MMR market. On the other hand, a total of 125 projects are delayed across Noida, Greater Noida and Gurugram markets, consisting of over one lakh housing units.
Q: What will be the role of home buyers in the process?
A: After a project is selected for funding, buyers will have to contact their lenders in order to check if their current loan agreement would change. Other than that, they would need to continue paying their EMIs, according to the existing arrangement.
Q: What will happen to projects, where the builder is alleged to have committed fraud?
A: Projects involved in fraud or diversion, will not be considered by the fund. This means builders, such as Amrapali, HDIL, Unitech and 3C Company, may not get money from the AIF.
Q: Can the size of the fund grow in future?
A: Yes. The government expects the size of the fund to grow bigger, with more sovereign and pension funds coming forward to make contributions. Currently, LIC and SBI have pledged Rs 15,000 crores for the AIF, while the centre is contributing the reaming Rs 10,000 crores.