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Real estate revival: Projects under litigation in HC, SC not eligible for Rs 25,000 crore bailout fund

BusinessToday.In     November 7, 2019

The government on Thursday said that the housing schemes facing litigation in the higher courts will not be eligible for Rs 25,000 crore bailout fund for stalled real estate projects.

The frequently asked questions (FAQs) issued by the finance ministry said that the proposed special window or the alternative investment fund (AIF) will not invest in projects facing litigation (or pending before) the high courts or the Supreme Court.

"The focus of this special window will be on the projects that are stalled for lack of construction funding. It shall also look at projects that are NPAs (non-performing assets) or undergoing NCLT (National Company Law Tribunal) proceedings, that can commence construction immediately after funds are made available," the FAQs explained.

They clarified that the NPA or NCLT projects will be also be considered for the last mile funding by the government. "Based on the inputs received from the stakeholders the Government has decided to increase the scope of investments to include NPA as well as NCLT projects. All applications for financing would be reviewed by the investment committee of the fund for approval, after due diligence and discussions with existing lenders and legal advisors," the ministry elucidated.

Also Read: Realty stocks zoom up to 17% after govt clears Rs 25,000-cr fund to complete stalled housing projects

The ministry further explained in the FAQs that "any or all projects undergoing corporate insolvency resolution process before the NCLT can be considered for funding through the Special Window" depending upon the "stage where the resolution plan for such insolvency resolution process has not been approved/rejected by the committee of creditors."

The finance ministry also said the maximum funding will be Rs 400 crore for any single project that will be seeking assistance from the 'special window' or the alternative investment fund (AIF) for completion of the 1,508 projects comprising about 4.58 lakh units.

"Homebuyers are advised to reach out to their respective lending institutions to seek necessary guidance for additional borrowing or revival of their existing home loans within the existing legal and regulatory framework and standard board approved policies of the lending institutions," FAQs stated.

Also Read: Real estate distress fund: Developers may have to pay 9% interest

The bailout fund will be set up as a Category-II AIF debt fund registered with the Securities and Exchange Board of India (SEBI) and would be professionally run. SBICAP Ventures Limited will be engaged as the investment manager.

The FAQs explained that the funding will be provided to the RERA-registered affordable and middle-income housing projects that are stalled for lack of adequate funds, but their net worth should be positive (including NPAs and projects undergoing NCLT proceedings).

Projects that are "very close to completion" will get priority in funding.

Affordable and mid-income housing projects are those wherein dwelling units do not exceed 200 square metre carpet area and are priced up to Rs 2 crore in Mumbai Metropolitan Region, up to Rs 1.5 crore in National Capital Region, Chennai, Kolkata, Pune, Hyderabad, Bengaluru and Ahmedabad, and up to Rs 1 crore in the rest of the country.

Also Read: Centre approves Rs 25,000 crore bailout fund for stalled housing projects

The Union Cabinet had on Wednesday approved the establishment of a 'special window' fund to provide priority debt financing for the completion of stalled housing projects.

Finance Minister Nirmala Sitharaman on September 14 had announced that a special window for affordable and middle-income housing will be created. The special window was to provide last-mile funding for housing projects that are stressed.

Subsequently, inter-ministerial consultations and several stakeholder consultations were held with the housing industry including housing finance companies, banks, non-banking financial companies, investors and real estate developers.

Problems being faced by homebuyers, developers, lenders and investors were ascertained that could be addressed through the special window.

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