InvestorQ : Government has allocated Rs.25,000 crore for the real estate sector. But, is that sufficient to address the problems of realty companies like HDIL and Unitech that are stretched?
Mahima Roy made post

Government has allocated Rs.25,000 crore for the real estate sector. But, is that sufficient to address the problems of realty companies like HDIL and Unitech that are stretched?

Answer
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Aditi Sharma answered.
10 months ago


Please understand that the purpose of the announcement is not to help the companies that have taken money from home buyers and failed to deliver the property. The purpose is to help the people whose money is stuck in such projects for now fault of theirs. Again, here we need to understand is that Rs.25,000 crore is just the equity capital of the AIF. On this the fund can leverage up to 5 times and take the corpus to Rs.125,000 crore. Then, this money is for construction cost. Typically, construction is just 20% of the value of the property. So, if you have Rs.125,000 crore of funding, then you can cover projects with an overall value of Rs.625,000 crore. That is a lot of money that will be released. Also as these projects are completed, we will see vendors getting paid, labour getting paid, suppliers getting their dues and banks and NBFCs getting back part of their money. All this will lead to a major multiplier effect on cash flows and also on consumer demand. The net impact could actually be very big, if implemented properly.