Monday , 17 May 2021
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Real estate projects involved in fraud won’t get anything from Rs 25,000 crore fund

Real estate projects involved in fraud won't get anything from Rs 25,000 crore fund

Government has clarified that housing projects involved in fraud or diversion of funds may not be considered for the real estate distress fund. This is meant to avoid any misappropriation or cornering of funds by builders.

Real estate sector breathed easy after a long time as Finance Minister Nirmala Sitharaman announced a bailout fund worth Rs 25,000 crore on Wednesday. In its last meeting, the Cabinet approved formation of an alternative investment fund (AIF) that will provide financial help to 1600 stalled housing projects across the country. Even NPA and NCLT projects could avail funding from the distress fund after due process.

Addressing concerns over misuse of the fund, finance ministry has clarified that projects involving fraud or diversion may not be considered by AIF. The ministry has mentioned that all applications for financing under AIF would be reviewed by the investment committee of the fund for approval, after due-diligence and discussions with existing lenders and legal advisors.

“Project and developer selection shall be the prerogative of the investment manager and the investment committee of the fund. The investors including the Government will not be interfering with the financial objectivity of that process. The decision of the Investment Committee shall be guided by the investment objective of the fund as agreed in the contribution agreement entered into with the investors,” the ministry has said in a statement.

Elaborating on the due diligence that will be conducted for investments under AIF, finance ministry said that investment manager SBICAP Ventures will first complete an internal financial analysis to see if the project meets the fund’s investment criteria. This will be further supplemented by external due diligence agencies to cover areas such as title, financial, real estate and legal, among others, including consultation with existing lenders, the ministry added.

“The capital provided by the fund would be used only for completion of the stalled projects. This should benefit all the stakeholders in the project,” finance ministry has asserted.