The government on Saturday came up with an important announcement. It revealed that a stress fund of nearly Rs. 20,000 crores has been set up for the completion of stalled affordable and middle-income housing projects that have not been classified as non-performing assets (NPAs) and are not facing any insolvency action. This much-awaited decision is expected to potentially help 3.5 lakh dwelling units throughout the country. However, the move will offer little or no respite to lakhs of homebuyers in about 400 projects dealing with insolvency cases that have been held up in National Company Law Tribunal. There is also a case of a few thousand developers whose fund flow has been put on hold as banks have termed them as NPAs because of their inability to repay loans. The government made it clear that their resolution will have to be through IBC and NCLT processes.
Finance Minister Nirmala Sitharaman stressed in a news conference that this window will help in wrapping up of affordable and middle-income housing project. She further stated that the funds will be managed by professionals. She, however, made it clear that the coverage did not cover NCLT or NPT-hit cases as the government had no intention of interfering with their outcome.
As the new buyers of insolvency-hit real estate projects are difficult to find, homebuyers have put their faith on the stress fund for the completion of their projects, some of which were launched more than 10 years ago. In the weeks to come, the government will release details that would define middle-income dwelling units, which is missing currently. Sitharaman said that the project with 60% completion will have the eligibility to tap money from the stress fund and advised home-buyers of held up projects can approach developers to prod them into availing the facility.
The government intends to contribute Rs. 10,000 crore for the special window, similar amount will come from outside investors. Like National Infrastructure Investment funds, the Centre can contribute to the stress fund, LIC, private-sector lenders and similar financial institutions can also contribute to help build the corpus. While announcing the measures to boost the housing sector, Sitharaman also stressed that the interest rates on “House Building Advance” for government employees will be lowered and linked with 10-year government security yields to encourage them to buy new houses. Government employees, the finance minister said, contribute a major component of demand for housing and it encourages more government employees to purchase new houses.
This house building assistance will be available to the employees of the central and state government for constructing a new house on a plot owned by the employee or jointly with the spouse and also for buying a new house or flat. An employee, however, can avail such an advance only once during his/her entire service. The government also made an announcement that the External Commercial Borrowing (ECB) guidelines will be relaxed in order to facilitate the financing home buyers will be eligible under the PM Awas Yojna. The finance minister stated that this move will be executed in consultation with the RBI.