The creation of the Alternative Investment Fund (AIF) of Rs 25,000 has infused the much-needed respite in the realty sector. However, the developers in West Bengal are unlikely to benefit from the move as the projects in the State have been registered under the West Bengal Housing Industry Regulation Act 2017 (HIRA), rather than the Real Estate (Regulation and Development) Act, 2016 (RERA).

The non-acceptance of the Central Government’s Real Estate (Regulation and Development) Act, 2016 (RERA), and the enactment of a separate real estate law might prove to be a bane for developers in West Bengal as they stand ineligible for the financial assistance under the bailout package. While the Finance Minister Nirmala Sitharaman announced an Alternative Investment Fund (AIF)  of Rs 25,000 to fast-track the development of 1,600 stalled residential projects, she articulately mentioned that the fund would only be invested in RERA-registered projects.

Points to note:

The West Bengal government has adopted its version of real estate regulation Act, known as the West Bengal Housing Industry Regulatory Act (HIRA).

The Act was passed in the State Assembly in October 2017.

A total of 325 ongoing projects have been registered under the Act. Kolkata and Parganas (North and South) have the maximum number of approved projects.

The proclamation has upset the developer fraternity in West Bengal as they feel that the move would eliminate them from the financial assistance process, particularly at the time when they are struggling to make their ends meet.

Rahul Som, Property Consultant, Home and Solutions, Kolkata avers, “Financial aid at this juncture is utmost essential as builders have been facing severe financial crisis ever since the withdrawal of high currency notes in 2016. No action was initiated by the government in the past, and now when some financial help has been offered, it comes with multiple riders which have distressed the developers across the State."

As per an industry report, the current unsold residential inventory in Kolkata stands at 95,000 units, of which around 13,000 residential apartments have been excessively delayed.

On the demand front, nearly 70 percent of the housing demand in the city is in affordable housing priced within Rs 45 lakh; however, the shortage of supply has subdued the housing sentiment, highlights 99acres Kolkata Insite Report. One of the prominent reasons for the scarcity of preferred residential projects in Kolkata has been the limited access to the financial resources which has circumscribed the realtors from completing their unfinished projects and focus on new developments. Barring a few localities in the eastern and southern zones of the city, the residential supply across Kolkata has significantly dipped in the last two years.

Sandeep Dabriwal, Property Consultant, LR Dabriwal Realtors, shares, “The Central government should either incorporate the stalled housing projects in West Bengal under the realm of AIF or should announce some additional measures to relieve the pain of troubled builders. Financial intervention is imperative to rev up the real estate sentiment in the State and boost employment in the construction sector.”

The AIF would pump Rs 25,000 crore into the sector to provide last-mile funding to the stalled real estate projects. Of this, the Centre would pool Rs 10,000 crore, and the State Bank of India (SBI) and Life Insurance Corporation (LIC) would add the remaining amount of Rs 15,000 crore. The fund size might surge as other sovereigns, and pension funds are also expected to make contributions in future. Moreover, projects declared NPA or those not reported liquidation-worthy by NCLT would also benefit from this initiative. Overall, the development would aid close to 4.58 lakh housing units stuck in 1,600 projects across the nation.

Apart from West Bengal, other States that might remain outside the ambit of AIF include Arunachal Pradesh, Meghalaya, Sikkim, Nagaland and Lakshadweep as these States have failed to notify RERA, the builders in these regions are ineligible as per the established standards. By far, 29 States and Union Territories (UTs) have formed the Real Estate Regulatory Authority. Maharashtra has been the first State to notify RERA. The State is also at the forefront with a maximum number of RERA-registered projects, i.e. 21,000. Following suit are the States of Gujarat and Uttar Pradesh which have close to 5,800 and 2,680 projects registered under RERA, respectively.