"For purposes of funds to be set up, government shall act as sponsor and total funds committed by government would be up to Rs 10,000 crores. Funds will be set up as Category-II Alternate Investment (AIFs) Fund registered with Securities and Exchange Board of India (SEBI)," she said.
"We have come up with a special window that will be structured as an Alternative Investment Fund which will pool all these investments. Government will infuse Rs 10,000 cr. Government, Life Insurance Corporation (LIC) and State Bank of India (SBI) will infuse Rs 25,000 cr," Sitharaman said.
"This investment will be used to complete housing units worth less than Rs 2 crore in Mumbai, Rs 1.5 crore in Delhi-NCR, Chennai, other metros, and Rs 1 crore in other cities," the minister added. A rough estimate has shown that over 1600 housing projects are stalled across the country.
Sitharaman also said that the move will finance the 1,600 stalled housing projects comprising 4.58 lakh housing units across the country. The move is aimed at generating employment as well as reviving demand of cement, iron and steel industries. It is also aimed at relieving stress in the major sectors of the economy.
The fund size would increase as sovereign and pension fund are expected to participate in this AIF. "The AIF can be utilised even by the projects which have been declared non-performing assets or are facing insolvency proceedings," Sitharaman added.
The announcement comes a day after the Finance Minister said that the government and the Reserve Bank of India (RBI) are in the process of resolving the issues faced by the real estate sector and admitting that the issues of the industry have not been addressed fully and it has a spillover effect on many sectors.
Sitharaman also stated that the government has been taking various steps since August 2019 to combat the ongoing crisis in several sectors and is exploring all possible ways to revive the slowdown in consumption. Last month, the government cut corporate tax rate to 22 per cent, which involved an outgo of Rs 1.45 lakh crore.
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Real estate developers are finding it difficult to raise funds after the default by the IL&FS group that triggered a liquidity crisis in the economy. This was aggravated by the economic slowdown, which at one hand caused huge inventory pile-up due to lack of demand and also brought ongoing projects to a standstill due to lack of funds.
"There are many alternative funds which are now approaching us, saying we would like to do something with you as long as some supporting mechanism is available for reviving the realty sector," Sitharaman said on Tuesday.
The Finance Minister also said that home buyers are looking up to the government to help complete the stalled projects through policy decisions. In September, Sitharaman had announced the creation of a Rs 20,000 crore special fund to provide financing to the stalled affordable and middle-income housing projects in the country.