Money won’t be used to clear past dues: Sitharaman

NEW DELHI: The government on Wednesday cleared a fund with an initial corpus of Rs 25,000 crore to revive up to 4.6 lakh housing units in 1,600 projects with “positive net worth”, including those that have been classified by banks as non-performing assets or are facing insolvency resolution action.While announcing the move, which was approved by the Union Cabinet, finance minister Nirmala Sitharaman indicated there may be some relief for those who have defaulted on repayment of their home loan EMIs in the stalled projects across the country.The Reserve Bank of India is expected to announce the details for regularisation of accounts through a clarificatory circular, providing relief to several loan defaulters who had booked houses in projects that can now be taken up for revival.Separately, the government is expected to announce measures for Jaypee Infratech, which has been facing insolvency action for over two years now.The latest package comes two months after the government had announced the establishment of a Rs 20,000-crore fund for the completion of stalled affordable and middle-income housing projects but had kept NPA and NCLT cases out of the ambit of the “special window” for the real estate sector, which is facing an acute downturn due to a liquidity crunch as several builders are highly leveraged and are unable to sell new apartments.A slump in the construction and housing sector also impacts job generation and demand for key sectors such as steel and cement, which have also been hit by the slowdown.Sitharaman said that based on feedback from homebuyers and other stakeholders, the government decided to expand the ambit of the fund, where the Centre will chip in with Rs 10,000 crore and entities such as the State Bank of India , LIC and other institutions, including overseas funds, will contribute Rs 15,000 crore.The fund will provide loans on commercial terms after assessing the viability of each project but will ensure that the money flows into an escrow account so that it is used only for construction purposes. Sitharaman said the money will not be used to clear past dues, which will be dealt with separately.The plan is to take up only financially viable projects with the FM ruling out providing any sort of “grants”, although the overall idea is to revive as many housing projects as possible to help middle-class homebuyers who have invested their savings in buying houses. Many buyers are paying EMIs while staying on rent as the projects are indefinitely delayed and in many cases the builders are behind bars.While a project can be referred for the “special window” by a lender, the fund will only take it up if it is in line with its investment policy and after a detailed due diligence process that will include scrutiny of legal aspects, the title, micro-market and financial analysis. The final decision will be taken by the investment committee with an advisory board maintaining oversight.“This will be a win-win for homebuyers and real estate developers as it will help alleviate financial stress faced by homebuyers who have invested their hardearned money, while also releasing funds stuck in such delayed/ stalled projects for productive purposes,” said realtor Niranjan Hiranandani, who is the president of the National Real Estate Development Council.