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A Rs 25,000 cr push: Here's how govt plans to revive the real estate sector

While the government will act as a sponsor with its Rs 10,000-crore initial contribution to the category-II AIF, SBI and LIC will provide an additional Rs 15,000 crore for the fund

Nirmala Sitharaman
Nirmala Sitharaman | Photo: PTI

In a cabinet meeting, on Wednesday, Finance Minister Nirmala Sitharaman approved setting up of a Rs 25,000-crore alternative investment fund (AIF)  to revive around 1,600 stalled housing projects across top cities in the country.

The AIF will be a special window to provide priority debt financing for completion of projects in the affordable and middle-income categories, she added.

Except the projects that have already received orders from the National Company Law Tribunal (NCLT) for liquidation, the government has decided to include all projects declared as a non-performing assets and those which are facing insolvency proceedings at the NCLT.  

However, the funding will be possible only if they are registered under the Real Estate (Regulation and Development) Act or RERA. 

At present, the Mumbai Metropolitan Region and the National Capital Region are two of the worst-hit property markets in the country, with 95,000 and 195,000 stuck projects, respectively. In addition, about 55,000 units more are stuck in Tier-II cities.

In view of the recent step taken by the union cabinet, the founder at PropEquity, Samir Jasuja said, “Almost 80 per cent projects in the NCR and the MMR will come to life.”

Ajay Bodke, chief executive officer and chief portfolio manager at Prabhudas Lilladher, said the fund has the potential to act as a force multiplier to impart necessary push to revive economic activity in the nerve centres of the economy.

While the government will act as a sponsor with its Rs 10,000-crore initial contribution to the category-II AIF, SBI and LIC will provide an additional Rs 15,000 crore for the fund, which will be initially managed by SBI Caps through escrow account. It will also be registered with market regulator SEBI and will support all RERA certified projects.

Category-II AIFs typically invest in unlisted companies by raising funds from high net worth individuals (HNIs) and foreign portfolio investors (FPIs) through private equity, debt funds...

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