NEW DELHI - India's cabinet has approved 100 billion rupees ($1.41 billion) for a fund to help clear stalled housing projects, Finance Minister Nirmala Sitharaman said late on Wednesday.
Sitharaman said the State Bank of India (SBI) and state-run insurance company Life Corporation of India will contribute an additional 150 billion rupees, taking the total size of the fund to 250 billion.
The real estate sector in India has been hit by a severe liquidity crunch this year after a series of debt defaults by non-banking finance companies. The cash-flow squeeze has in turn halted building projects that have left numerous homebuyers stranded even after paying their monthly instalments.
The new fund will help revive more than 1,600 moribund housing projects, Sitharaman said.
"The Special Window would provide funds to stalled housing projects enabling them to complete unfinished projects and consequently ensure delivery of homes to a large number of home-buyers," the minister said.
Sovereign and pension funds would also be allowed to contribute to the expand the size of the fund in the near term, Sitharaman said.
Managed by SBICAP Ventures Ltd, the special fund would only invest in projects that have a positive net worth or that is expected to make more money on completion than the cost of the project, she said, adding that it would give preference to projects that are near completion.
Sitharaman also said the fund would even invest in housing projects that have turned to non-performing assets for banks, as well as ones that are in bankruptcy court.
It would, however, refrain from projects that have already been ordered to be liquidated, she said.