Relief for realty: Govt sets up Rs 25k-cr fund to revive stalled projects

In other decisions, Cabinet has approved pacts signed with German agency DGUV; pact with Guinea on renewable energy; and signing revised DTAC with Brazil

Nirmala Sitharaman
Nirmala Sitharaman during the press conference

In a much-awaited relief for distressed homebuyers awaiting possession of their flats, the Centre on Thursday committed up to Rs 10,000 crore for completing housing projects stuck for years.

The Union Cabinet has cleared a proposal to set up a 'Special Window' in the form of Alternative Investment Fund (AIF) to provide priority debt financing for the completion of stalled housing projects that are in the affordable and middle-income housing sector.

The corpus size of the AIF would be scaled up to Rs 25,000 crore after SBI and LIC pump in funds. It would grow further in the coming days with the addition of sovereign wealth funds and pension funds.

The AIF would meet fund requirements of 1,600 stalled projects where money of 4.58 lakh homebuyers are stuck, Finance Minister Nirmala Sitharaman said briefing the media after Cabinet meeting.

The Special Window will also cover projects that are classified as NPA or where NCLT proceedings have already started but with the rider that they meet other eligibility criteria. Some of the conditions for getting the last-mile funding are projects being networth positive, registered with RERA and falling in the category of affordable and middle-income housing project.

Department of Economic Affairs secretary Atanu Chakraborty said that networth positive clause will be applied project-wise taking into account cash flows and total project cost and not at the corporate level.

This would mean even projects being undertaken by now bankrupt Amrapali and Jaypee Group could qualify for funding depending on the completion status.

Anticipating realty sector booster from the government, the Indian stock market on Wednesday surged to record levels. It may touch a new peak tomorrow, bolteriung realty sector stocks.

"It's a very welcome change from the initial announcement. Now the only criteria for eligibility is net worth positive projects. This will ensure that the fund is actually deployed to complete projects which are even NPA or also in NCLT. We are certain that a majority of stuck homebuyers will benefit from the announcement of a Rs 25,000 crore stress fund...Quick deployment of money and efficient decision making for qualification of projects will solve the long pending problems of home buyers," Jaxay Shah, CREDAI National Chairman, said.

Sitharaman said the Special Window would provide funds to stalled housing projects enabling them to complete unfinished projects and consequently ensure delivery of homes to a large number of homebuyers.

She said that the move would reduce the financial stress faced by a large number of middle class home buyers who have invested their hard earned money.

"This will also restore trust between buyers and developers and boost the sentiments of the housing sector as a whole and release large amounts of funds stuck in these projects for productive use in the economy," a press statement said.

The proposed fund would initially be managed by SBI Caps through an escrow account. It will also be registered with market regulator SEBI and will support all RERA certified projects.

"This is a critically important move which eliminates the ambiguity which surrounded theAtimelines for setting up the fund, and its actual implementation. Finally, countless aggrieved homebuyers will see the light at the end of the tunnel," Anuj Puri, Chairman a" ANAROCK Property Consultants said.

Finance Minister Sitharaman had in September announced that a special window for affordable and middle-income housing will be created for providing last-mile funding for housing projects which are stressed.

Fund created under the Special Window will be setup as priority debt funds. A detailed Investment Policy will be laid down to guide the selection of projects to be financed through a detailed due-diligence process that will include legal due-diligence, title due diligence, micro-market analysis, financial analysis etc.

"The final decision will be taken by the Investment Committee of each fund comprising experienced professionals and industry experts. The Investment Committee will approve individual deals independently as per Investment Policy ensuring alignment with investment objectives of the Fund," the statement said.

Sitharam also said that RBI has also issued a clarificatory note that would allow banks to release pendingAloan amounts of home buyers whose money has got stuck in stalled projects.

In order to give a boost to crisis-hit real estate sector, the government has in the last few months announced a slew of measures. It has provided additional deduction up to Rs 1,50,000 of interest paid on loans borrowed up to March 31, 2020 for purchase of houses valued up to Rs 45 lakh.

The interest rate on House Building Advance has also been lowered and linked with the 10 Year G Sec Yields to encourage more government servants to buy new houses among other key measures.

The Union Cabinet on Wednesday gave ex-post facto approval to pacts signed between India and DGUV, a German agency in the field of occupational diseases, re-habilitation and vocational training.

The MoUs with DGUV, a specialized agency in Germany working for Occupational Safety and Health (OSH) and social protection, will help broadly in exchanging information and promoting activities in the area of rehabilitation related to medical, occupational and social re-habilitation of insured persons with disabilities, an official statement said.

The pacts will also help in prevention, detection and treatment of occupational diseases, it added.

The exchange of information and collaboration will enable capacity building and social re-habilitation of insured persons with disabilities, besides prevention, detection and treatment of occupational diseases.

The Union Cabinet on Wednesday gave ex-post facto approval to a pact signed between India and Guinea in the field of renewable energy.

"The Union Cabinet chaired by Prime Minister Narendra Modi has given approval for the MoU (memorandum of understanding) between India and Guinea in the field of renewable energy," an official statement said.

The objective of the MoU is to establish the basis for a cooperative institutional relationship and to encourage and promote bilateral technical cooperation in renewable energy on the basis of mutual benefit, equality and reciprocity between the parties.

The areas of cooperation include solar energy, wind energy, bio-energy, and waste to energy, small hydro storage and capacity build.

The MoU will also help in strengthening bilateral cooperation between the two countries, it added.

The Cabinet, headed by Prime Minister Narendra Modi, on Wednesday gave nod for signing of a revised Double Taxation Avoidance Convention (DTAC) with Brazil with an aim to provide tax certainty, among other things, to investors and businesses of both countries.

The existing DTAC between India and Brazil, being very old, was required to be amended to bring it in line with international developments and also to implement the recommendations contained in the G-20-OECD Base Erosion and Profit Shifting Project (BEPS).

"After Cabinet approval, necessary formalities for bringing the protocol into force will be completed," it said.

The revised DTAC will facilitate elimination of double taxation, provide tax certainty to investors and businesses of both countries and augment the flow of investment through lowering of tax rates in source state on interest, royalties and fees for technical services, an official statement said.

Its implementation would be watched and reported by the finance ministry.

The existing DTAC between India and Brazil was signed on April 26, 1988, and was amended through a 'protocol' signed on October 15, 2013, in respect of exchange of information. Through the present 'protocol', the DTAC has been amended on various other aspects.

The Cabinet also approved the Cadre Review of Posts & Telegraphs Building Works Service (P&T BWS), Group 'A'.

"The number of duty posts was fixed at 105. The approval would result in strengthening of the cadre structure both at the headquarters and in the field units of the Department of Telecommunications and the Department of Posts on the basis of functional requirements. This will reduce the existing stagnation of P&T BWS officers," an official release said.

It was also decided that there will be no fresh recruitment into the cadre, and the cadre will be phased out in such a manner that there is no adverse impact on the incumbents, the release added.