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Will Alternate Investment Fund revive stalled housing projects?
Financial Express  |  November 18, 2019

Page:    |  Sanjeev Sinha

To bring relief to the ailing residential sector and lakhs of bereaved

homebuyers, the Modi government recently announced a Rs 25,000-crore fund for stalled affordable and mid-segment housing projects across the country. Industry experts, however, believe that though good in intent, the amount is far too little to solve the entire mess. For instance, just the top 7 cities alone have more than 5.76 lakh units (launched in 2013 or before) stuck at various stages of non-completion, while the number will be much higher across the length and breadth of the country.


In fact, close to 19 lakh housing units across the top 7 cities in India are under various stages of construction as on the end of Quarter 3 this year, as per ANAROCK research, which include delayed, stalled as well as ongoing under-construction units. NCR and MMR alone consist of 60% of the total 19 lakh under-construction units, while Pune has 16% share with over 2.97 lakh units in various stages of construction.


However, this Special Window will provide last-mile funding to only those housing projects which are in the non-NPA and non-NCLT category and are net worth positive, that too in the affordable and middle income category only.


Moreover, “the few caveats attached to this aid &ndash ie., projects must be RERA-registered &ndash further limit its scope and benefits. The government, therefore, must go a step ahead and immediately work towards reducing the cash crunch among developers. A logical step would be to ease funding by banks and NBFCs. This will also help in bringing down the number of stalled projects,” suggests Anuj Puri, Chairman, ANAROCK Property Consultants.


Whatever be the case, experts say it is a good move to at least help reignite the sentiments of homebuyers and kickstart the wheels of residential real estate. As soon as stuck projects complete, homebuyers will have more options to choose from because several homes within them are still lying unsold.


“Additionally, we may see price values of these completed homes &ndash that either maintained status quo or reduced over time due to excessive delays &ndash rise marginally depending on their features and location. All in all, there will be some shake up in these stalled projects issue which was literally freezing on account of zero funds,” informs Puri.


Developers’ Take


Property developers seem to be happy with the creation of this Alternative Investment Fund (AIF) as they believe that this will help revive the realty sector.


“We welcome the announcement by the Finance Minister to set up a Special Window in the form of AIF and dedicate a fund of 25,000 crore for the completion of stalled housing projects. The move is expected to create an avenue of relief to homebuyers and developers in the sector. The specific fund is expected to revive 80% of the real estate projects. This action by the government will induce cash flow in the system and kickstart the revival process. This decision will not only help in completing the stuck projects, but will also regain the confidence of buyers to invest in real estate. The benefit will surely be felt in the NCR and Mumbai regions,” says Ashish Sarin, CEO, AlphaCorp.


Ravish Kapoor, Managing Director, Elan Group, says, “Real estate in India is doing well and promises steady growth prospects in the coming years. The residential segment will revive with the government’s infusion of Rs 25k crore and its revival will have a domino impact on the commercial and retail sectors. These segments are already on the growth trajectory due to the government’s support to REITs, repo rate cuts and reduction in GST rate.”


Industry observers say that falling prices, shrinking sales and piling inventory have collectively created many hurdles before the developers. The situation was getting worse as the fear of default made financial bodies reluctant to lend to these projects. The consequent slump in the construction industry affected the current jobs and the future job prospects. However, the current move of the government would help generate considerable employment opportunities and also give a boost to the economy.