Acknowledging the plight of the homebuyers, recently the Hon'ble Finance Minister made an announcement pertaining setting up of Rs25,000cr fund, being in the nature of Category II AIF.
The real estate sector has off lately been in the limelight for
mostly the plights of the homebuyers who have not been provided
with their promised abode and being left in lurch. Acknowledging
this ordeal of the homebuyers, RERA has been enacted which is been
seen as a beacon of hope for the homebuyers and also to instil some
discipline in the real estate sector. The insolvency law of the
land i.e. the IBC has also been amended with a view to provide an
ammunition to the homebuyers to have their say in the insolvency
resolution process. Subsequently, many petitions were filed,
especially by the developers, to challenge the constitutional
validity of the amendment to the IBC for homebuyers. Recently, the
Hon'ble Supreme Court has upheld the constitutional validity of
such amendment to IBC thereby retaining the cheer on the homebuyers
face.
Having said so, the plight of the home buyers is yet to be
addressed in an effective and efficient manner as most of the
aggrieved home buyers are yet to be provided with any
'constructive' remedies.
Acknowledging the plight of the homebuyers, recently the
Hon'ble Finance Minister made announcement pertaining setting
up of Rs25,000cr fund, being in the nature of Category II AIF. The
categories of homes, projects and the cities have been clearly
earmarked which would be able to seek benefit under this special
window. The government will act as a sponsor with its Rs10,000cr
initial contribution to such Fund. While State Bank of India (SBI)
and LIC will provide an additional Rs15,000cr for the fund, that is
proposed to be managed by SBI Cap. Some overseas institutional
investors/ Sovereign Wealth Funds etc. are also expected to be part
of this process as it would be a great opportunity for them as well
to be part of this magnanimous project, both for commercial as well
as non-commercial reasons.
On a review of the projects that would be covered by these
measures, it becomes clear that the homebuyers in the affordable
and middle-income housing units are set to benefit, which has
basically been at the heart of this entire home buyer saga. The
fund will address residential properties in Mumbai that are priced
below Rs 2 crore. For Delhi, Kolkata, Bengaluru, and Chennai, among
others, the cap has been set at Rs 1.5 crore. For smaller cities,
it is at Rs 1 crore per unit. All types of stalled projects,
regardless of the stage of completion, will be considered for
financing. The key requirement is to demonstrate a positive net
worth at the project level.
By the announcement, it can be safely said that AIF structure has
received a booster shot by being chosen as the preferred mode for
reviving the intended stalled real estate projects. AIF structure
carry various benefits such as pass-through tax status and informed
investor base. If the proposed measures bear fruits, then the AIF
structure would likely be viewed as a go-to structuring model,
thereby further widening its popularity, especially for overseas
investors.
AIFs in India are required to be registered with SEBI and regulated
under SEBI AIF Regulations, 2012. AIFs can be in the form of a
trust, company, LLP or a body corporate. However, the trust route
has been the most preferred one. AIF, being a pooled investment
vehicle, collects funds from investors who are in turn issued
units. For setting up of an AIF, the key elements inter alia are
determining the sponsor (person who sets up/promotes the AIF), the
AIF model, investment manager, trustee and most importantly the
focus sector.
The money collected for the AIF will be kept at an escrow account
and its disbursement will be in a phased manner according to the
requirement of each project in a time-bound manner.
Here the intent of the government needs to be applauded that it
took a substantial step in the direction to resolve the impending
problems of the homebuyers, who after putting their life time
savings, at least in most of the cases, were appearing helpless
with any 'real'istic solution on the horizon.
This step is undoubtedly a positive one and it is hoped that the
aching problems of the innumerable home buyers at last receives
some relief due to this worthy step of the government.
Care needs to be taken on the utilization of the Fund earmarked for
revival of the stalled projects and at the same time the monitoring
of the projects would have to be done in an accountable manner for
which professional firms can be engaged to ensure that the desired
objects are met. This has to be done to ensure that there is no
diversion/misuse of funds. If one takes a holistic approach,
representatives of the homebuyers could also be made part of the
such monitoring and fund utilization exercise. This could be done
so that the entire process is done in a transparent manner and that
the very objectives of this measures are eventually achieved.
Originally published in India Infoline News Service
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