The Rs 25,000-crore alternative investment fund (AIF), set up to provide last-mile funding for stalled real estate projects by the government, has raised Rs 10,530 crore in its first round and around 400 applications may have already been filed. The first round of disbursement may take place as early as this month itself, sources told Moneycontrol.
Earlier this month, SBICAP Ventures, the investment manager of the fund, announced in a statement that the Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund I attracted interest from investors like State Bank of India (SBI), Life Insurance Corporation of India (LIC), Housing Development Finance Corporation (HDFC) and major public sector banks.
Sanjiv Chadha, Chairman at SBICAP Ventures, said the fund has made remarkable progress since its announcement. “We have substantially completed the fundraising, have scaled up the team, formed the investment committee and have begun examining potential investment opportunities.”
“In the first round, applications of top realty brand names from across the country, wherein the fund requirement is over Rs 100 crore, are likely to be cleared. The first round of approvals may be granted by December 31 itself,” sources said.
On November 6, the government approved the creation of a 'professionally managed' Rs 25,000 crore fund for boosting stalled middle and low-income RERA registered housing projects that are networth positive.
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 of the fund to Rs 25,000 crore.
The Finance Ministry in its FAQs, released later, said the maximum funding will be Rs 400 crore for any single project that will be seeking assistance from the 'special window' or the Alternative Investment Fund (AIF) for completion of the 1,508 projects comprising about 4.58 lakh units.
The AIF can be utilised even by the projects, which have been declared non-performing assets (NPAs) or are facing insolvency proceedings.
The real estate projects that can make the cut include those that require last-mile funding to complete construction, those in the affordable and middle income category, networth positive projects that also include NPAs, those undergoing NCLT proceedings, and RERA-registered projects. Priority will be given to projects that are nearing completion.
Homebuyers are expected to benefit from the funding as it may help revive the stalled projects, leading to early completion and timely possession, especially for buyers paying both EMIs and rent for years. The fund seeks to provide relief to builders who require last-mile funding to complete stuck projects.
Some developers, however, are of the opinion that the fund amount needs to be enhanced soon to ensure that more stalled projects can avail last-mile funding.
“In the first round only big ticket Grade A developers may benefit. More money is required for mid-segment established developers too. The performa of the application form, rules and regulations should be widely circulated to enable more builders to come forward and apply for funding,” a developer said.
Another issue is to do with SBI’s mandate that the proceeds of the fund can be utilised only for construction. They can neither be utilised for repayment of the principal loan of the existing lender nor for servicing interest of the existing lender.
“If the existing lender refuses to provide a No Objection Certificate and allow the fund manager’s debt to take first charge of the project, the existing stalled project will in any case become an NPA within the next three months. The problem here is that even if the fund manager were to take over, the primary lender’s quality of charge will become secondary. This will not work unless RBI allows for one-time restructuring of the loans without NPA classification,” a developer explained.