These are polarised times. While a section chooses to see the side of a plunging economy, others view it as the much-needed doom before the actual rise. While we leave the actual judgment up to the economists, the government has come up with a respite in these restless times. Finance Minister Nirmala Sitharaman has announced a few schemes to boost exports, and it includes setting up a 20,000 crore Stress Fund for the Real Estate, for completing projects that have been stalled. However, there are certain exceptions to the same. This will also include projects which have been rendered bankrupt but not yet liquidated.
Here are the complete details of the section which has elated the RE industry, including Homesfy, because we believe in encouraging steps that boost the nation as a whole.
However, insolvency experts have a different tune to sing. They say that the Act should clearly define the priority of charge. This is because there is a differential treatment that has been prescribed for secured, unsecured, operational creditors, government dues and workmen’s dues in case of distribution of assets when liquidation occurs.
Many professionals in the field have also lauded it, stating that it will make the whole resolution process much faster. It will also encourage the saleability of projects in the future.
A detail to note here is that while the government will dole out 10,000 crores, the remaining will come from IBC and SBI. The procedure here will be quite similar to that of NCLT, albeit with some differences. Instead of a creditors’ committee, there will be an allottees association comprising banks and homebuyers, who will arrive at a blueprint for the projects’ revival.
The stalled projects in Mumbai Metropolitan Region, ie MMR itself are about 4,10,000 units, the highest. This particular step may just cover a fraction of the costs, but will at least push these projects which will otherwise be rendered redundant. This is indeed welcome as it will smooth out various projects that have been stuck in the pipeline due to a lack of funds.
However, the government will have to bring in some major tax reforms as well, for the Real Estate players to take full advantage of this step, because of GST and stamp duty take away a major chunk of the money. Homesfy and many other real estate aggregators hope for the best.