After government rolls out the AIF (Alternative Investment Fund) which is a revival scheme for real estate sector is beneficial or a mess?

The scheme is launched on 6th Nov 2019 by finance minister Smt. Nirmala Sitharaman with an objective to revive real estate sector has setup a fund named alternative investment fund (AIF). In the past we have seen banks not willing to fund real estate projects due to their heavy NPAs and precautionary approach, here government steps in wherein they are trying to induce funding in stucked real estate projects by accepting application of even NPAs and NCLT cases.

The clear intention here is to give benefit to home buyers as their homes will now be completed and handover to them but some conditions like returns, financial benefits etc.

Problem here with real estate are not only funding, there are more issues which they are facing like land acquisition, project clearance, excess supply than demand, high cost and prices but the projects mainly are suffering because of financing to complete and handover to buyers.

Present Real Estate Scenario

Suppose a real estate project has 400 flats with 200 pre-booking but stuck into the middle because of financial reasons as there new flats are not selling, now bank are not getting there payment from developer and home buyers as they have also stopped paying installments, so the whole project becomes a NPA for bank and bank are now not ready to restructure or provide additional loans.

Scenario after Real Estate AIF

Now as the project was near completion, AIF comes into play. It approves loan and provides the loan to real estate developer which is NPA and open a Escrow account from which all the expenses of development will be routed through. Now the project will get complete in 1-1 ½ Year and 200 home buyers will get their homes ready. They will start paying there remaining installments and as the project has become ready to move in, the other buyer will also come forward and remaining 200 flats will also get liquidate in a short span of time in an ideal situation and developer will also dispose his balance borrowings.

Additional points to note about Real Estate AIF:

Special points to be noted

Negatives of Real Estate AIF :

Key Takeaways :

Expected companies to be benefitted after 5-6 months from Real Estate AIF

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