Govt announces package to ease financial stress on construction cos

The Government on Wednesday announced a package to ease the financial stress on construction companies, including a possible loan restructuring package for the real estate sector.

According to reports, the move could prompt property developers to resume work on stalled projects.

After a meeting of the Union Cabinet, Finance Minister Arun Jaitley told reporters, “The Department of Financial Services and the RBI will try and prepare a policy on how to deal with those companies which have got a lot of stressed assets in the real estate sector. We hope that a series of these decisions would pump in a lot of liquidity in the sector, activate a lot of real estate and infrastructure projects which have been stranded for some time and support the entire process of dispute resolution in relation to construction and real estate”.

As per a report in a national daily, the package prepared by the NITI Aayog seeks to ensure release of 75 per cent of funds locked up in projects where an arbitration award has been made in favour of a construction company. In case where the award has been challenged, agencies such as National Highways Authority of India would transfer 75 per cent of the award amount into an escrow account against margin free bank guarantee. This amount can be used to repay loans and generate liquidity besides easing the burden on companies.