Proposed fund could help revive stressed realty sector

Identifying genuine projects in need of support will be critical to success

From first looks, the long-awaited package to support the real estate sector, cleared by the Cabinet on Wednesday, appears well-designed. The ~25,000 crore Alternative Investment Fund (AIF) announced by Finance Minister Nirmala Sitharaman has expanded in both size and scope from the earlier one announced in September. And the variables are clear, such as the unit sizes that will be supported. The AIF will provide funds to bail out stalled real estate projects with unit size of less than ~2 crore a unit in metros and ~1 crore in other places. According to Ms Sitharaman, over 1,600 projects involving some 4.58 lakh housing units are stalled for want of funds.

The real estate sector is not only one of the biggest providers of jobs but also has a huge multiplier effect in the economy. While the AIF is a good idea, it is important that it is implemented without glitches. Too many good ideas have suffered due to bad implementation. The critical part will be identifying genuine projects in need of support and ensuring that biases do not creep in. Also important will be attracting more investors into the AIF. The finance minister said that sovereign funds and other private investors have shown interest. These need to be followed upon quickly and money should be released from the AIF right away so that the trickle-down effect is felt before the end of this financial year. The real estate industry now has to do its part.