The Union Cabinet has approved the creation of an Alternative Investment Fund (AIF) of ₹25,000 crore to provide last-mile funding for stalled affordable and middle-income housing projects across the country, Finance Minister Nirmala Sitharaman announced on Wednesday.
The Minister had announced the proposal to create this fund in mid-September, which the Cabinet has now approved. All affordable and middle-income housing projects that are net worth positive and are registered with the Real Estate Regulatory Authority (RERA) and that have not been deemed liquidation-worthy will be eligible.
“The fund size will initially be ₹25,000 crore with the government providing ₹10,000 crore and the State Bank of India and the Life Insurance Corporation providing the balance,” Ms. Sitharaman said. “The fund is not capped at ₹25,000 crore and will likely grow as a lot of sovereign funds have shown interest.”
The funds will be set up as Category-II Alternative Investment Fund registered with the Securities and Exchange Board of India and will be managed by SBICAP Ventures Limited.
According to the government’s estimates, there are more than 1,600 housing projects in which 4.58 lakh crore units are stalled. The Finance Minister, however, did not provide details about what the total funding requirement was to complete all these projects.
The Cabinet decision amends the original announcement by allowing housing projects that have been classified as non-performing assets (NPA) and that are under National Company Law Tribunal (NCLT) proceedings also to be eligible for financing.
“Earlier, when I had made the announcement, we had decided that the fund would be used for non-NPA and non-NCLT projects,” Ms Sitharaman said. “Now we have withdrawn the non-NPA and non-NCLT provision. If the project has not been declared liquidation-worthy, it is eligible to be covered under this scheme.”
The Finance Minister added that the fund would be professionally managed and that the financing would not be provided in a lump sum. Instead, the required amount for each stage of completion would be provided as required at that stage.
The AIF is expected to pool investments from other government-related and private investors, including public financial institutions, sovereign wealth funds, public and private banks, domestic pension and provident funds, global pension funds and other institutional investors.
“The fund is therefore expected not only to support the sector but also generate commercial return for its investors,” the government said in a release.
The government further expects this fund to not only ease the stress in the real estate sector but also in other major sectors of the economy as well.
“The creation of special window for affordable and middle-income housing projects would revive the real estate sector and generate considerable employment,” the release added. “Besides, revival of the sector will also lead to demand of cement, iron & steel industries giving further impetus to generate more employment. This initiative will have a positive effect in releasing stress in other major sectors of the Indian economy as well.”
