Funding For Single Housing Project Wrapped At Rs 400 crore: Finance Ministry

Govt Wrapped at Rs 400 Crore for Single Housing Project

A day after declaring Rs 25,000 crore Alternative Investment Fund (AIF) for stalled housing projects by FM Nirmala Sitharaman, has made it clear that residential housing projects facing litigation in High and Supreme Court will not be cover under this funding plan. At the same time, the government suggested homebuyers to interact with lenders for additional borrowing or revival of their loans.

The government said nearly 1,509 housing projects including nearly 458,000 housing units are stalled, based on industry surveys and advised homebuyers to pay their outstanding dues to allow early completion.

The government also simplified the “positive net worth” provision for the project to be qualified for assistance from the alternate investment debt in a list of frequently asked questions (FAQ) that it issued on Thursday.

The FAQs also said the recommended AIF will not fund projects that are facing litigation in the high courts or the Supreme Court. The focus of this special window will be on the projects that are stalled for adequate funding.

It will also study projects that are NPAs (non-performing assets) or bearing up NCLT (National Company Law Tribunal) actions, that can start construction shortly after funds are made available.

The fund will be set up as a Category-II AIF debt fund registered with the Securities and Exchange Board of India (SEBI) and would professionally work. SBICAP Ventures Limited will be involved as the investment manager.

The FAQs further said the funding will be provided to the RERA-registered affordable housing and middle-income housing projects that are delayed due to sufficient funds, but their net worth should be positive (including NPAs and projects bearing up NCLT actions).

Affordable and mid-income housing projects are those projects where housing units do not exceed 200 sq. m carpet area and are valued up to Rs 2 crore in Mumbai Metropolitan Region (MMR), up to Rs 1.5 crore in National Capital Region (NCR), Chennai, Kolkata, Pune, Hyderabad, Bengaluru and Ahmedabad, and up to Rs 1 crore in the rest of the country.

This doesn’t add additional charges for social amenities, parking, housing society charges, brokerage, deposits, registration and stamp duty. Even villas will be counted if they match conditions.

The fund manager will be authorized to change the developer of a project if required.

Retail loans provided to buyers in eligible stalled projects will be reconstructed as per Reserve Bank of India (RBI) standard procedure and the approved procedures of bank committees.

Consequently, inter-ministerial discussions and several stakeholder meetings were held with the housing industry including housing finance companies, banks, non-banking financial companies, investors and real estate developers.

Issues being faced by homebuyers, developers, bankers, and investors were identified and that could be discussed through the special window.

What does Net-worth positive mean?

As per FAQ issued by the Finance Ministry in this regard explains that “Net worth positive” means the value of receivables plus that of unsold inventory should be greater than completion cost and outstanding debts at the project level.

What will be the criteria for the selection of projects for funding?

• Networth positive projects under RERA are eligible for funding
• NCLT projects will be considered
• Up to 200 sq.m flats are eligible for funding
• No funding for projects in the Supreme Court and High Courts
• Projects that are very close to completion will receive preference in funding
• Projects that are stalled for lack of sufficient funds

What is an affordable and mid-income housing project?

Affordable or Mid-Income Housing shall be defined to cover any housing projects where housing units do not exceed 200 sq. m. RERA carpet area and are priced as below:

• Up to or less than Rs 2cr in MMR
• Up to or less than Rs 1.5cr in National Capital Region (NCR, Chennai, Kolkata, Pune, Hyderabad, Bangalore, and Ahmedabad
• Up to or less than Rs 1 cr in the rest of India

Will this fund use for the project facing litigation issues before the High and Supreme Court?

No, the focus of this special window will be on the projects that are stalled for lack of sufficient funding. It shall also look at projects that are NPAs or bearing up NCLT actions, that can start construction shortly after funds are got ready.

Who will be the investor of the fund?

Alternate Investment Fund formed under the Special Window would aim for investment into the fund from the government and other private investors including cash-rich financial institutions,  public and private banks, sovereign wealth funds, domestic pension and provident funds, global pension funds, and other institutional investors.

Which projects bearing NCLT proceedings are qualified to be considered for funding?

Any projects bearing corporate bankruptcy judgment process before the NCLT can be considered for funding through the Special Window up to the stage where the resolution procedure for such a bankruptcy resolution process has not been approved/rejected by the committee of creditors.

What will be the role of the government and the investment managers in this special window?

In this special window, govt will act as the sponsor to the proposed fund and will have the authority and responsibility as specified under SEBI (AIF) Regulations, 2012. Whereas, the investment manager is responsible for fundraising, investments, and managing the fund partners.

Will projects under NPA and NCLT be considered for the funding?

Yes, based on the inputs received from the stakeholders the govt has decided to increase the scope of investments to include NPA as well as NCLT projects. All applications for funding would be examined by the investment committee of the fund for sanction.

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