Relief for home buyers! FM announces Rs 10,000 crore to fund stalled projects, makes house building advances cheaper

Relief for home buyers! FM announces Rs 10,000 crore to fund stalled projects, makes house building advances cheaper

In a bid to boost housing sector and facilitate homebuyers, the Modi government on Saturday announced a Rs 10,000 crore special window to provide funding for the completion of ongoing housing projects.

In a press briefing, Finance Minister Nirmala Sitharaman said the government would set up a special window worth Rs 10,000 crore to provide last mile funding for housing projects, which are non-NPA (Non-performing asset) a non-NCLT (National Company Law Tribunal) projects & are net worth positive in affordable and middle-income category.

“The objective is to focus on the construction of unfinished units,” the FM said. The special fund size of Rs 10,000 crore would be contributed by the Centre and roughly the same amount would come from outside investors, said the FM.

The fund would be professionally run with experts from the housing and banking sector, the minister added.

Sitharaman also said the interest rate on housing building advance will be lowered and linked to the 10-year G-sec yields. The FM said that as part of affordable housing, the government will give additional deduction up to Rs 1.5 lakh for interest paid on loans borrowed up to March 31, 2020, for purchase of house valued up to Rs 45 lakh.

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“Government servants contribute to a major component of demand for houses. This will encourage more government servants to buy new houses,” she said.

In a move to give a fillip to affordable housing, the government will relax External commercial borrowing (ECB) guidelines to help housing developers obtain overseas funds, said Sitharaman, adding that this is in addition to the existing norms for ECB.

“ECB guidelines will be relaxed to facilitate the financing of homebuyers who are eligible under Pradhan Mantri Awas Yojna, in consultation with the Reserve Bank of India,” she added.

According to an industry expert, the measures related to housing and export promotion like textiles will provide a big boost to employment too since these are labour-intensive industries.

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“The new measures announced by the FM today for stimulating the economy send the clear message that the government is giving top priority to reviving growth in the economy,” said VK Vijayakumar Chief Investment Strategist at Geojit Financial Services.

“The Rs 10000 crore fund for providing last-mile funding for stalled non- NPA, non- NCLT projects needs to be specially appreciated..,” Vijayakumar said.

S Ranganathan, Head of Research at LKP Securities, said, “Special Window to provide the much needed last-mile funding for housing projects which are non-NPA and non-NCLT would also enable completion of unfinished homes. Moreover, the relaxation of ECB guidelines for affordable housing including interest rates on house building advance is a good step.”