7-Nov-2019: Special Window for Funding Stalled Affordable and Middle-Income Housing Project
The Union Cabinet chaired by Prime Minister Shri Narendra Modi approved the establishment of a 'Special Window' fund to provide priority debt financing for the completion of stalled housing projects that are in the Affordable and Middle-Income Housing sector.
For the purposes of the fund, the government shall act as the Sponsor and the total commitment to be infused by the Government would be up to INR 10,000 crore. The fund is seeking matching contributions from Banks, LIC and others to generate a total corpus of around INR 25,000 cr.
The fund will be set up as a Category-II AIF (Alternate Investment Fund) debt fund registered with SEBI and would be professionally run.
For the first AIF under the Special Window, it is proposed that SBICAP Ventures Limited shall be engaged to be the Investment Manager.
This fund would in turn would provide relief to developers that require funding to complete a set of unfinished projects and consequently ensure delivery of homes to the home-buyers.
Since the real estate industry is intrinsically linked with several other industries, growth in this sector will have a positive effect in releasing stress in other major sectors of the Indian economy as well.
Background: The Hon'ble Finance Minister on September 14, 2019 had announced that a special window for affordable and middle-income housing will be created. This special window will provide last mile funding for housing projects which are stressed. Subsequently, Inter-ministerial consultations and several stakeholder consultations were held with the housing industry including Housing Finance Companies, Banks, NBFCs, Investors, and Real Estate Developers. Problems being faced by home buyers, developers, lenders, and investors were ascertained that could be addressed through the Special Window.
The Government shall act as the sponsor to the proposed fund and shall have the authority and responsibility as specified under SEBI (AIF) Regulations, 2012. Whereas, the investment manager is responsible for fund raising, investments and managing the fund team.
AIFs created/funded under the Special Window would solicit investment into the fund from the Government and other private investors including cash-rich financial institutions, sovereign wealth funds, public and private banks, domestic pension and provident funds, global pension funds and other institutional investors.
Funding shall be provided to the projects that meet the following criteria:
- Stalled for lack of adequate funds
- Affordable and Middle Income Category
- Net worth positive projects (including NPAs and projects undergoing NCLT proceedings)
- RERA registered
- Priority for projects very close to completion.
For the purposes of the first fund under the Special Window, Affordable or Mid-Income Housing shall be defined to include any housing projects wherein housing units (to be specified in detail in the fund documents) do not exceed 200 sq. m. RERA carpet area and are priced as below:
- Upto or less than INR 2cr in Mumbai Metropolitan Region
- Upto or less than INR 1.5cr in National Capital Region, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad
- Upto or less than INR 1cr in the rest of India.
Net-worth positive projects for the purpose of funding through the Special Window shall mean those projects where the value of receivables plus the value of unsold inventory is greater that the completion cost and outstanding liabilities at the project-level.
Carpet Area shall have the meaning as assigned to it in clause (k) of section 2 of RERA i.e. Carpet Area means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
Taking into account the stress in the housing and construction industry, many measures have been undertaken by the Government in the past to boost the housing sector, such as:
- Providing IT deduction on Affordable Housing
- Introduction of Repo rate/external benchmark linked loan products
- Implementation of the Pradhan Mantri Awas Yojana (PMAY)
- Liquidity support to HFCs.
- Partial Government guarantee for assets purchased by a bank from a stressed NBFC or HFC
- Lowering of interest on House Building Advance (HBA).
21-Nov-2019: First fixed income ETF of bluechip PSUs
The government is expected to launch India’s first fixed income Exchange Traded Fund (ETF) comprising debt securities of about a dozen state-owned companies by mid-December 2019. The ETF is expected to have a size of Rs 15,000 crore to Rs 20,000 crore.
Roadshows are currently on for the Fund, which could be launched as early as December, and that there is significant interest in the market. The fund will comprise only AAA-rated papers of the PSU companies.
The debt ETF provides a new option to conservative investors to own securities of government-owned companies along with the facility of overnight liquidity as ETF units will be listed on exchanges. Compared with bank fixed deposits that generate a post-tax return of around 5.5 per cent, this product could generate a return of over 7 per cent for the investors.
The debt ETF can comprise corporate debt securities in the form of bonds, credit-linked note, debentures, promissory notes as underlying instruments. Large central public sector enterprises are expected to participate in the maiden debt ETF.
The government expects the debt ETF to improve liquidity in the corporate bond market, enhance investor base and smoothen borrowing plans of the participating state-owned companies. The Department of Investment and Public Asset Management (DIPAM) has appointed Edelweiss Asset Management as the asset manager for the proposed debt ETF. Tax treatment of the debt ETF will be same as that of debt mutual funds.
In the Union Budget 2018-19, the then Finance Minister Arun Jaitley had announced that DIPAM planned to come out with a debt ETF, which will help government companies better plan their capital expenditure and borrowing needs. Unless the proposed debt ETF also includes government securities along with corporate bond papers, the money raised will go the PSUs issuing debt as part of the ETF.
While there are a number of equity and gold ETFs in the Indian market, there are no debt ETFs, barring the two government securities-based ETF that have not generated much investor interest. ETFs with underlying CPSE shares have been the other category that were added in the last couple of years as the government chose to divest its equity in state-owned companies through this route. Earlier this year, the government raised Rs 10,000 crore through CPSE-ETF and another Rs 4,368 crore through Bharat-22 ETF.
The proposed debt ETF will be India’s first large fund that provides retail investors the convenience to invest in a fixed income product comprising a basket of securities, without the need to study individual bond issues. Last year, the largest chunk of disinvestment came from several tranches of ETFs launched by the government, resulting in total collections of Rs 45,730 crore through this mode alone.
29-Oct-2019: President of India Presents National Corporate Social Responsibility Awards
The President of India, Shri Ram Nath Kovind, presented the National Corporate Social Responsibility Awards (NCSRA) in New Delhi. The NCSRA has been instituted by the Ministry of Corporate Affairs to recognize outstanding contribution in the field of Corporate Social Responsibility (CSR).
Speaking on the occasion, the president was happy to note that those sections of society that need the helping hand most are among the main beneficiaries of the CSR activities. He said that the corporations have, thus, made a worthy contribution towards the national goals. They are helping the nation progress towards the cherished goal of building a more equitable society. They have focused on sustainable projects creating a long-term impact.
The President said that broadly, CSR initiatives have been aligned with the national priorities such as public health, education, livelihoods, water conservation, sanitation, and natural resource management. He expressed hope that innovative solutions to persisting development challenges will emerge from the CSR activities.
The President said that the government is sensitive about the need to calibrate the CSR regime to make it more effective. In September, the scope of the CSR activities was widened to include more categories of research incubators. This thrust on research and development will immensely help innovators. He said that it is equally important to internalise social welfare in the corporate culture. He urged upon corporate to motivate their employees and sensitise them to this higher calling in service of the marginalised sections of society. He said that this single step will generate enough goodwill for wealth creators among ordinary people.