InvestorQ : What is the purpose of the Real Estate Fund announced by the government and how will it work?
Arti Chavan made post

What is the purpose of the Real Estate Fund announced by the government and how will it work?

2 years ago

On 06 November, the Finance Minister Nirmala Sitharaman announced the setting up of a Rs.25,000 crore fund to help the ailing real estate sector in India. Here is what the plan is all about.

· An alternate investment fund (AIF) of Rs.25,000 crore will be created by the government which will be used to complete the semi-finished projects in real estate across India.

· While the government of India will contribute Rs.10,000 crore, the balance Rrs.15,000 crore will come from SBI, LIC and other such funds. The AIF will also be allowed to leverage based on this corpus at a later date.

· The AIF will participate in projects that are semi-finished subject to the condition that the project is still net worth positive.

· The AIF will also support semi-finished projects that have either been classified as NPAs or even in cases where the said company has been referred to NCLT. The only condition is that the project should be net worth positive.

· Currently, in India there are nearly 1600 housing projects consisting of 4.6 lakh units that are incomplete due to paucity of funds. However, Anarock Consultants pegs incomplete housing units much higher at 5.7 lakhs, which is a lot of money locked up.

· The AIF will undertake to complete the projects and then hand it over to the investors who have already paid a part of the money to the builders.

· The above measure is expected to help the housing sector in two ways. Firstly, it will unlock crores of rupees that is locked up in semi-finished projects across India. Secondly, scores of mid-sized companies that were suppliers or sub-contractors to these projects could also see their business getting revived.

The government has clarified that this was just the beginning and over a period of time the corpus and the scope of the AIF could be expanded substantially.