About 40 per cent stalled units to benefit from special window, say analysts

Customers of Jaypee Group’s housing projects may finally see some light of the day as experts say that since the positive net-worth criteria will be looked at project level, some Jaypee projects would qualify for this funding.

“Jaypee projects may also get funding. Since the government has said that net-worth criteria will be seen at project level and not at company level, so the towers that will have positive net-worth can come under this and qualify for funding,” said Pankaj Kapoor, founder and MD, Liases Foras, a real estate research firm.

In an FAQ released on Thursday, the government clarified that net-worth positive projects stand for projects where value of receivables plus the value of unsold inventory is greater that the completion cost and outstanding liabilities at the project-level.

“The idea is to fund viable projects that are stuck due to lack of funding on account of market failure, which could be due to liquidity crunch. Since the criteria of net worth is being looked at at the project level, and not at the company level, the scheme will cater to many projects even of companies that may be having negative net worth,” a Finance Ministry official said. Since projects have their projected cash flows from sold and unsold inventory of housing units, even after accounting for all construction and completion costs, the project may be viable to deliver positive expected returns to the special fund, the official said.

According to a study done by Liases Foras, there are around 2,000 stalled residential projects across the country with around 5 lakh housing units. Delhi-NCR accounts for almost 35 per cent of such housing units with stalled units amounting to 1.76 lakh. While Mumbai Metropolitan Region accounts for 92,000 such housing units, Bengaluru, Pune and Chennai have 37,000, 36,000 and 23,000 such housing units, respectively. The remaining are in other cities across the country.

Ramesh Nair, CEO and country head, JLL India, said Delhi-NCR contributes to over 60 per cent of delayed residential units, followed by Mumbai, which constitutes nearly one-fifth of the delayed units across the top seven cities.

Kapoor said since all stalled projects have positive net-worth, around 1.5 lakh units may benefit from the same. “NCR has the largest number of stalled projects and units but projects with receivable potential are much lower in NCR than in MMR,” he said.

Nair said stringent criteria with respect to projects being net worth positive, registration with RERA, appraisal by investment committee will ensure “safety and protection of commercial returns for the investors.” While the real estate industry players welcomed the government’s Wednesday announcement, they now await the implementation of ground.

Sanjay Dutt, MD and CEO, Tata Realty and Infrastructure said, “This is a much-required boost to bring the real estate sector back on its feet and alleviate the concerns of homebuyers that were facing the burden of unfinished projects. However, the deployment time of this initiative holds the key to its success.”

On Wednesday, Finance Minister Nirmala Sitharaman announced the creation of a special window to provide last-mile funding for stressed housing projects. While the commitment of funds to be infused by the Centre in the affordable and middle-income group housing sector via the special window was set at Rs 10,000 crore, the fund would seek matching contributions from banks, LIC and others to generate a corpus of about Rs 25,000 crore, said the Centre in its FAQ on Thursday. It stated AIFs created/funded under the window would solicit investment into the fund from the Centre and other private investors, including cash-rich financial institutions, sovereign wealth funds, public and private banks. The government has decided to raise the scope of investments to include NPA and NCLT projects.