Home Buyers, Industry Express Concern On Delay In Setting Up Stress Fund For Realty

New Delhi: A stress fund for the real estate sector, which was announced last month by Finance Minister Nirmala Sitharaman, can bring some relief to the industry and to the home buyers. There was lot of hope and cheer among all the stakeholders when the fund was announced by the government. Both the home buyers as well as the industry have now started voicing some concerns on the delay in setting up the fund and operationalizing it.

Sitharaman, while holding the press conference to announce setting up such a fund, had said that the modalities and the exact contours of the fund would be decided soon. However, nothing has been forthcoming from the government in terms of how the fund would be set up, how will the sum of Rs 20,000 crore (Rs 10,000 crore that was to be come from government’s side and another Rs 10,000 crore that was to be arranged by the private parties) be put together and who will run the fund and oversee day-to-day functioning. 

“Government is taking unusually long time in announcing various modalities of stress fund which is causing anxiety among homebuyers and adding to the woes of industry reeling under huge backlog of delayed projects,” said Abhay Upadhyay, President, Forum for People’s Collective Efforts (FPCE), told RealtynInfra.com.

FPCE is a home buyers’ body that has been taking several measures to reach out to government to plug loopholes in RERA and to highlight the plight of property buyers in the country.

The industry says that if there is a delay of 4-5 months in getting the fund rolling, there will be spiraling problems. 

“The reasons for the delay are not clear, but what is certain that as long as the delay persists, key issues will remain unaddressed. The timeline for setting up this fund and its actual implementation is critical. If the implementation process is delayed over the next four to five months, more units could either turn into NPAs or fall under NCLT - thus eliminating their eligibility for this funding. Homebuyers stuck within such units will continue their wait for light at the end of the tunnel,” said Anuj Puri, Chairman, ANAROCK Property Consultants.

Dhruv Agarwala, Dhruv Agarwala, Group CEO, Elara Technologies, echoed similar concerns. “Sector needs immediate steps that can improve liquidity and expedite the process of developing stuck projects. It is extremely important that stuck projects should be delivered as soon as possible to improve the trust factor in the market. We hope that a quick decision will be taken to address the situation,” he said.

Upadhyaya has also questioned the rationale of government to hold consultation with same set of builders who have delayed the projects for the stress fund.

“It is also really very sad and unfortunate that the Government is consulting those developers again who not only cheated homebuyers but also banks and Development Authorities about utilization of stress fund. We suggested which was part and parcel of our demand for creation of such fund that the developers should not be a part of either task force which should be constituted or in its management/utilisation in any way.

We hope that considering the track records of developers, Government will not fall in the trap of developers and ensure that the funds are not disbursed directly to them at any cost and consultations in this regard is done with right stakeholders including independent experts,” he said. 

Sitharaman has said last month that a stress fund would be set up to help stuck mid-income residential projects in which at-least 60 percent of construction has been carried out. The fund will not be for the projects where insolvency proceedings have been started against the builder by National Company Law Tribunal or for those that have been declared NPAs. The project has to be networth positive to qualify for help from the fund.  

The fund will have its corpus from the LIC and sovereign funds and experts from the banking and housing sectors will operate the fund, Sitharaman had said.

There are a total of 5.76 residential units (launched in 2013 or before) across budget segments that are stuck in various stages of non-completion in the top 7 cities alone. These also include units falling under NPAs or NCLT. Even if residential units of about 4 lakh are considered that are eligible for government funding by way of stress fund, this includes around 1.5 lakh units that are priced more than Rs 80 lakh budget and hence will not qualify under the said caveats of the stress fund.