Related Topic in KAS Prelims Syllabus:
Economy [Paper-II]: Infrastructure in Indian Economy
- Union Cabinet has approved the creation of an Alternative Investment Fund (AIF) of ₹25,000 crore to revive stalled housing projects across the country.
- The focus on real estate is part of the government’s broader plan to kick-start economic growth, which slowed to a six-year low of 5% in the quarter ended 30 June.
- As per original announcement, all affordable and middle-income housing projects that are net worth positive and are registered with the Real Estate Regulatory Authority (RERA) and that have not been deemed liquidation-worthy will be eligible.
- The Cabinet decision amended the original announcement by allowing housing projects that have been classified as non-performing assets (NPA) and that are under National Company Law Tribunal (NCLT) proceedings also to be eligible for financing.
Alternative Investment Fund
- The funds will be set up as Category-II Alternative Investment Fund registered with the Securities and Exchange Board of India and will be managed by SBICAP Ventures Limited.
- AIF is expected to pool investments from other government-related and private investors, including public financial institutions, sovereign wealth funds, public and private banks, domestic pension and provident funds, global pension funds and other institutional investors.
Who will contribute to the fund?
- The fund size will initially be ₹25,000 crore with the government providing ₹10,000 crore and the State Bank of India and the Life Insurance Corporation providing the balance.
- The fund is not capped at ₹25,000 crore and is likely grow as a lot of sovereign funds have shown interest.
Distribution of Funds
- The fund would be professionally managed and the financing would not be provided in a lump sum.
- The required amount for each stage of completion would be provided as required at that stage.
- The announcement augurs well for real estate related sectors as demands for construction material will spike.
- Positive impacts of the move include generation of employment, revival of demand for cement, iron and steel industries and relieving stress in other major sectors of the economy.
- According to the government’s estimates, there are more than 1,600 housing projects in which 4.58 lakh crore units are stalled.
- This fund has the potential to act as a force multiplier to impart the necessary push to revive economic activity in the nerve centers of Indian economy.
[Source: The Hindu, Livemint]