The Central Government's decision to set up a Rs 25,000 crore alternative investment fund (AIF) to revive the stalled ousing projects across top cities in the country is expected to help improve the real estate market and instill confidence among homebuyers, said Siddhartha Mohanty, MD and CEO of LIC Housing Finance Ltd (HFL). The company is expecting to disburse around Rs 55,000 crore during this year, up from Rs 48,000 crore last year and the market is seeing signs of growth, he added.
Speaking to reporters on the sidelines of LIC HFL's exclusive housing property fair Ungal Illam 2019, Mohanty said, "I am thankful that the government has addressed that long-pending issue. That will give further funding to stalled projects that are NPAs, but which are 60-70 per cent complete, are in the affordable segment, and have also limited their costs, based on the location. Most projects under such conditions will be completed with this support."
The government will contribute Rs 10,000 crore to to the AIF while the rest will come from LIC and State Bank of India.
Commenting on LIC HF's exposure in stalled projects, he said, "We have taken data on the exposure to stalled projects, and it will be less than Rs 1,200 crore. We are in talks with developers and expect that this will help us reduce NPAs. But it will take time, as project completion isn't an easy task." It will definitely improve the market and is aimed to instill confidence in the minds of home buyers, he added.
The Union Cabinet in the first week of this month approved the setting up of the AIF to revive around 1,600 stalled housing projects across top cities. The AIF will be a special window to provide priority debt financing for completion of projects in the affordable and middle-income categories, Finance Minister Nirmala Sitharaman said after the Cabinet meeting.
Mohanty said the housing sector, especially the affordable segment, is showing signs of growth and the company expects to disburse around Rs 55,000 crore this year as against Rs 48,000 crore last year. It has alread disbursed Rs 25,000 crore so far. Most of the growth this year is expected to come from affordable housing and commercial loans against property (LAP). The Pradhan Mantri Awas Yojana accounts for 26 per cent of the portfolio in the current year, while commercial LAP and the developer book make up seven per cent of the overall disbursement.
The company, while raising funds from the domestic market, is also looking at external commercial borrowing (ECBs). The quantum will be decided by its committee based on need, but the company has kept that option open, Mohanty said.
The south accounts for around 19 per cent of LIC HF's loan book. During the year ended March 31, 2019, the region disbursed around Rs 7,342 crore.