The Ministry of Finance has announced the creation of an Alternative Investment Fund (AIF) of Rs. 25000 crore for the housing sector.
- The AIF was approved by the Union Cabinet now while the proposal was made by the Ministry of Finance in September.
- It will provide last-mile funding for stalled affordable and middle-income projects.
- The Ministry noted that the funding will be for housing projects that have a positive net worth and are registered with the Real Estate Regulatory Authority (RERA).
- Also, those projects that have not been deemed liquidation-worthy will be eligible for funding.
- The government also decided to allow those projects that have been deemed as Non Performing Asset (NPA) and are under National Company Law Tribunal (NCLT) proceedings.
- Of the Rs. 25,000 crore, the Central government will provide Rs. 10,000 crore and the rest will come from the State Bank of India and Life Insurance Corporation (LIC).
- The Ministry also noted that the fund is expected to grow above Rs. 25,000 crore as sovereign funds are showing interest to invest in it.
- It will not only be limited to these entities. Other government-related and private investors such as public and private banks, financial institutions, domestic pension funds and provident funds, gold pension funds and institutional investors can invest in the fund.
Managing The Fund
- The fund will be managed by SBICAP Ventures Limited.
- It will be registered with the Securities and Exchange Board of India (SEBI) as a Category-II Alternative Investment Fund.
No. Of Projects
- As per an estimate of the government, there are 1600 housing projects with 4.58 lakh crore units stalled.
- Though the government has not provided exactly how much money is needed to complete these projects, the AIF will benefit a significant number of them.
- As per the Ministry, finance for the projects will not be provided in a lump sum but will be released at each stage of completion.
- The government is clear that the financing will not be for clearing past dues but is for completing the projects.
- The government is of the view that the fund will ease the financial stress faced by the real estate sector.
- The fund will also benefit those investing in it with high returns.
- It is expected that this special window will lead to more employment
- in the construction sector and the revival of the economy.
- The Securities Exchange Board of India (SEBI) brought a set of regulations in 2012 to regulate pooled investment funds.
- These regulations came to be known as Alternate Investment Funds Regulations.
- SEBI categorised AIFs into
- CATEGORY I: Funds such as social venture funds, venture capital funds, SME funds and infrastructure funds that receive government incentives come under category I.
- CATEGORY II: Funds under this category are allowed to invest anywhere but are not allowed to take debts, except for day-to-day operations.
- CATEGORY III: These are funds that can make short-term investments and then sell.
The AIF is much needed for the real estate sector which is reeling under financial stress. With the revival of stalled projects, there will be a boost to the economy and employment generation gains pace.