The government on Wednesday approved setting up of a Rs 25,000 crore bailout fund to finance 1,600 stalled housing projects as it looks to boost the economy by kickstarting incomplete projects.
The decision was approved by the Union Cabinet at a meeting held on Wednesday under the chairmanship of Prime Minister Narendra Modi.
Announcing the decision, Finance Minister Nirmala Sitharaman said the government will put in Rs 10,000 crore in this alternative investment fund (AIF) while SBI and LIC would provide Rs 15,000 crore, taking the total size to Rs 25,000 crore.
This will finance 1,600 stalled housing projects comprising 4.58 lakh housing units across the country, she added.
The move is aimed at generating employment as well as reviving demand of cement, iron and steel industries. It is also aimed at relieving stress in the major sectors of the economy.
The fund size would increase as sovereign and pension funds are expected to participate in this AIF.
The AIF can be utilised even by the projects which have been declared non-performing assets or are facing insolvency proceedings, Sitharaman added.
Since August, the government has been taking various steps to revive the market and consumption demand, the minister said.
Recently, the government cut corporate tax rate to 22 per cent, which involved an outgo of Rs 1.45 lakh crore.
Real estate developers are finding it difficult to raise funds after the default by the IL&FS group that triggered a liquidity crisis in the economy.
This was aggravated by the economic slowdown, which at one hand caused huge inventory pile-up due to lack of demand and also brought ongoing projects to a standstill due to lack of funds.
(With Agency Inputs)