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Centre to Contribute Rs 10,000Cr For Unfinished, Affordable and Middle-Income Housing, Says FM

Finance Minister Nirmala Sitharaman also relaxed guidelines of the External Commercial Borrowings to facilitate financing of home buyers.


Updated:September 15, 2019, 9:00 AM IST
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Centre to Contribute Rs 10,000Cr For Unfinished, Affordable and Middle-Income Housing, Says FM
Labourers work at the construction site of a residential complex. (Representational image: Reuters)

New Delhi: In a boost to the ailing housing sector in the country, Union Finance Minister Nirmala Sitharaman on Saturday announced the creation of a special window to provide last-mile funding for stalled housing projects. "The objective is to focus on construction of unfinished units," she said.

The housing projects considered for the special window have been limited to non-NPA (Non Performing Assets) and non-NCLT (National Company Law Tribunal) projects and worth positive in affordable and middle income category. "This will benefit roughly 3.5 lakh projects across the country," she added.

The government, on the lines of the National Investment and Infrastructure Fund (NIIF), may contribute to the Rs 10,000 crore fund for the special window. The rest of the funds will be from the Life Insurance Corporation (LIC) and other institutions and private capital from banks, sovereign funds, etc.

According to the Ministry of Housing and Urban Affairs, the definition of affordable housing is categorised into three parts, as per the minimum area of habitation.

For the Economically Weaker Section, affordable housing is defined with an area of habitation between 300-500 sq ft. The Lower Income Groups have a minimum area of 500-600 sq ft, while Middle Income Groups are allotted between 600-1,200 sq ft.

The ministry provides basic amenities like sanitation, adequate water supply, and power, in addition to the provision of community spaces, parks, schools and healthcare facilities within the neighbourhood.

An estimated 8.5 lakh home buyers are yet to get delivery of their units as hundreds of projects across the country are delayed due to liquidity crunch and demand slowdown. However, this scheme will give relief to only about 3.5 lakh such home buyers as projects of developers like Amrapali, Jaypee Infratech, Unitech and host of others are either facing bankruptcy or have been declared NPAs by lenders.

Asked about the fate of home buyers in Delhi-NCR who are stuck in bankruptcy-bound realty firms, Sitharaman said the insolvency proceedings have started in these projects and the issue would be resolved under the Insolvency and Bankruptcy Code (IBC). She stressed that home buyers have already been made financial creditor under the IBC and they would get their claim.

"The objective (of this fund) is to focus on construction of unfinished units. The government, on the lines of NIIF, can contribute to the fund while rest of the investors would be LIC and other institutions and Private capital from banks/sovereign funds/DFIs (development financial institutions) etc," she said.

The finance minister also said the fund would be set up as a Category — II AIF trust and will be professionally run with experts from housing and banking sector. She said eligible builders can seek funding from this special window.

In April, property consultant Anarock came out with a report that suggested that around 5.6 lakh housing units (worth Rs 4.5 lakh crore) that were launched in 2013 and before in seven cities were running behind the delivery timelines.

Last month, JLL India said as many as 2,18,367 housing units valuing Rs 1,55,804 crore are delayed and at various stages of construction in the seven cities — Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Pune.

Among other announcements, Sitharaman also relaxed guidelines of External Commercial Borrowings to facilitate financing of home buyers. This will be done in consultation with the Reserve Bank of India which will help identify eligible beneficiaries under the Pradhan Mantri Awas Yojana (PMAY). In addition, the interest rate on House Building Advance will also be lowered and linked with the 10 year G Sec Yields.

"Government servants contribute to a major component of demand for houses. This will encourage more government servants to buy new houses," the minister said.

On the state of the economy, Sitharaman said revival signs are being seen in industrial production and fixed investment. Inflation has been kept under 4%, while several NBFCs are benefiting from partial credit guarantee schemes announced earlier, she added.

(With inputs from PTI)

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