Union Finance Minister Nirmala Sitharaman on Wednesday announced a special window, structured as an Alternative Investment Fund of Rs 25,000 crore, for priority debt funding of stalled housing projects.

Sitharaman said the government would contribute Rs 10,000 crore to the fund. Banks such as the State Bank of India, and the Life Insurance Corporation will contribute Rs 15,000 crore. This will be an initial amount and more money may be added if necessary.

The finance minister said many home buyers had complained that flats booked and paid for by them had not been handed over yet. More than 1,600 housing projects, comprising about 4.58 lakh housing units, are currently stuck, Sitharaman added, quoting a survey conducted by the government.

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Sitharaman said the government had met large sections of home buyers as well as builders and tax authorities. “We held several meetings, with banks, with the Reserve Bank of India,” she added. “At one such meeting, the governor himself came and sat with us.”

“An escrow account will be created for incomplete projects with a value of less than Rs 2 crore in the Mumbai metropolitan region, Rs 1.5 crore in the National Capital Region, Chennai, Kolkata, Pune and other cities, and Rs 1 crore in any other parts of the country,” she said. Incomplete projects with positive net worth under the Real Estate (Regulation and Development) Act, 2016, will get funded till the last stage.

The Act seeks to protect home-buyers by establishing an authority for the regulation of the real estate sector in each state. It will also be an adjudicating body for dispute resolution.

She said the home buyers will benefit even if the projects are categorised as non-performing assets. “If your project has not been declared as liquidation worthy, you are eligible for this scheme,” she said. A similar announcement made in September had excluded non-performing asset projects and those facing bankruptcy proceedings under the National Company Law Tribunal.

The Centre’s principal spokesperson KS Dhatwalia said the move “will help relieve financial stress faced by large number of middle-class homebuyers who have invested their hard-earned money”.

Dhatwalia said the scheme would generate employment, revive the demand for the output of cement, steel and iron industries, and relieve a major stress on the economy.

The real estate industry was hit by demonetisation and the introduction of the Goods and Services Tax, which led to several problems including lower funding for developers and stagnant to falling property prices, Livemint reported.

Indian economic growth slipped to a six-year low of 5% during the first quarter of 2019-’20 financial year. Unemployment rate in 2017-’18 had peaked to a 45-year high of 6.1%. On August 23, Sitharaman had announced a set of measures to prop up the economy, less than two months after presenting the Union Budget. The Reserve Bank of India also announced that it would give the Centre Rs 1.76 lakh crore of its dividend and surplus reserves.

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