Bailout fund: Explore more options

Real Estate

The Narendra Modi government’s decision to provide a last-mile push for the stuck real estate projects via Special Investment Fund (SIF) worth Rs 25,000 crore is a welcome starting point. While it is targeted to provide relief to 1,600 real estate ventures involving 4.58 lakh housing units, the fund size may be too little and relief offered may be too late. There’s no plausible explanation for the delay in setting up the fund after it was first announced in September 2019, as part of the government's campaign to revive consumption demand in the slowing economy at 5% growth. Better late than never, considering that individual members of housing projects were running from pillar to post to quickly shift into their dream houses. Consumers were the worst-hit given that stuck real estate projects involving millions of units halted their plans, cut deep into their pockets with burdened loan repayments and rents.

The gargantuan problem in the real estate sector demands that fund size be broadened with the involvement of private investors. A moot question is should taxpayers’ money be routed to bail out the rogue industry that has been central to the black economy, generation and handling of cash earned by corrupt politicians, industry bigwigs and market players? Even terror financing seems to have been handled by some industry players. Without punishing errant players in an industry known for rampant funds diversion, ironically, resources from government, insurance and banks are marshalled to get projects completed. Have there been any instances of taking over personal assets of top real estate honchos that have erred with glee? State Bank of India (SBI) and Life Insurance Corporation (LIC) cannot be turned into whipping boys to bailout industry players that do not deserve leniency.

Inclusion of projects facing the National Company Law Tribunal (NCLT) proceedings for support from SIF is a significant call taken by the government. Several such real estate projects may have turned negative in net worth and become ineligible for SIF support. Even if SIF helps cases that could be completed in the next few months, the assets will have to be transferred to SBI and LIC whose liquid funds were being put into risky ventures. Also, SIF’s intervention may actually disrupt the NCLT proceedings mid-way. In such a scenario, what would be the way ahead in cases where bidding by potential investors is in the penultimate stage? In the melee, banks and financial institutions that have an exposure of over Rs 4.5 lakh crore may get minimal or no relief. Hence, the conclusion that SIF is the only ‘sustainable and viable’ preposition needs to be revisited. More options need to be explored as well.

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