The much-awaited announcement by the finance minister to boost the real estate sector failed to enthuse most homebuyers as the measures announced seems to address just a small part of the problem.
The Finance Minister N Sitharaman on Saturday announced a formation of a new fund to provide last mile funding for housing projects which are non-NPA and non-NCLT projects, which are 60% complete and are net worth positive in the affordable and middle-income category.
The size of the fund announced is Rs 20,000 crore with Rs 10,000 crore coming from the government of India and the rest from other financial institutions. The rest of the investors would be LIC and other institutions and private capital from banks, sovereign funds, DFIs, etc The Fund would be set up as a Category - II AIF trust and would be professionally run with experts from Housing and Banking Sector.
However, as per the government's estimate, the only 3.5 lakh dwelling units would be eligible for availing benefits under the new scheme leaving 5-10 lakh more housing units to their fortunes.
The Finance Minister said the housing projects which are NPAs or which are under the Insolvency proceedings have been kept out of the ambit of the new scheme because there are resolution mechanisms provided under those laws which the government did not want to disturb for now.
Different estimates suggest that there are 8.5 lakh to 14 lakh housing units which are incomplete and have been stuck due to different reasons across the country. Under Insolvency and Bankruptcy Code (IBC) alone, over 400 cases were under the different stage of resolution as on 30 June 2019.
Meanwhile, among other measures announced for the housing sector today by the finance minister include relaxation in External Commercial Borrowing (ECB) guidelines for housing finance companies funding home buyers who are eligible under the PM's Awas Yojna and lowering of interest rate on House Building Advance. The interest rate on house building advance will now be linked with the 10-Year G-Sec Yields.