Govt launches Rs25,000-cr window for stalled housing projects

Union finance minister Nirmala Sitharaman on Wednesday announced the setting up of a Rs25,000-crore special window to provide last mile funding for housing projects which are stressed.

The announcement comes after a of the union cabinet chaired by Prime Minister Narendra Modi that approved the establishment of a 'special window' to provide priority debt financing for completion of stalled housing projects that are in the affordable and middle-income housing sector.
The government will act as the sponsor of the asset alternative fund (AIF) with an initial corpus of Rs10,000 crore. The remaining Rs15,000 crore will be pooled in by financial institutions such as State Bank of India (SBI) and Life Insurance Corporation of India (LIC), Sitaraman said during a press briefing after a cabinet meeting.
Sitharaman said around 1,600 stalled housing projects comprising 4.58 lakh dwelling units will benefit from the alternate funding mechanism.
"This investment will be used to complete housing units worth less than Rs2 crore in Mumbai, Rs1.5 crore in Delhi-NCR, Chennai, other metros, and Rs1 crore in other cities," she added.
The fund will be set up as a Category-11 Alternate Investment Fund (AIF) debt fund registered with SEBI and would be professionally run.
For the first AIF under the Special Window, it is proposed that SBICAP Ventures Limited shall be engaged to be the investment manager.
This fund would in turn provide relief to developers that require funding to complete a set of unfinished projects and consequently ensure delivery of homes to the home-buyers.
Since the real estate industry is intrinsically linked with several other industries, growth in this sector will have a positive effect in releasing stress in other major sectors of the Indian economy as well. 
The finance minister had, on 14 September, announced plans to set up a special window for affordable and middle-income housing. This special window will provide last mile funding for housing projects which are stressed.
Subsequently, the finance ministry held inter-ministerial consultations and consultations with several stakeholder in the housing industry, including housing finance companies, banks, NBFCs, investors and real estate developers on the way forward. 
The Confederation of Real Estate Developers Association of India (CREDAI) welcomed the move, saying it will solve the long-pending problem of homebuyers.
Real estate developers are finding it difficult to raise funds after the default by the IL&FS group that triggered a liquidity crisis in the economy. This was aggravated by the economic slowdown, which at one hand caused huge inventory pile-up due to lack of demand and also brought ongoing projects to a standstill due to lack of funds.