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 has received hundreds of enquiries from real estate developers, majority of which are from MMR and NCR, sources told Moneycontrol.
As many as 14 domestic financial institutions have so far committed to the fund. “It is not attempting to raise more money right now but looking at foreign funds to come forward. This may take time,” sources told Moneycontrol.
SBICAP Ventures, an alternative asset manager, had in December achieved first closure of its Special Window for Affordable and Mid-Income Housing Fund (SWAMIH) Investment Fund I at Rs 10,530 crore. The fund attracted interest from investors such as the government of India, State Bank of India, LIC, HDFC and all major public sector banks. The Government of India has committed a fund infusion of up to Rs 10,000 crore in the special window.
“Enquiries have been received from developers across the country. As many as 65 percent of them are for stalled projects located in MMR and NCR,” sources said.
“We are not attempting to raise more money right now but looking at foreign investors who will take a significant amount of time. The strategy was to first attract interest from domestic investors, financial institutions and 14 of them have so far committed to Rs 10,530 crore,” sources said, adding the rate of interest would be approximately 15% approximately but that would again be deal-specific.
A real estate builder said that ideally, the fund cost should not be more than 12 to 13 percent keeping in mind the current market rates, adding it is important that the investment committee of the fund starts disbursing the amount soon so that more projects do come under the ambit of sick projects.
Sources also told Moneycontrol that real estate developers are free to apply for as much or as little an amount from the fund as per their requirement. “Just about anybody can apply for funding. However, applying by itself is not an indicator whether the fund will sanction the entire amount,” sources said.
NCR-based realty firm Supertech on January 5 said it had sought Rs 1,500 crore from the government's newly created stress fund to complete its 12 ongoing housing projects located in Noida and Greater Noida, Yamuna Expressway and Gurgaon. The company had said these 12 projects comprising 20,000 flats are at an advanced stage of completion and it requires last mile funding to finish the pending works and deliver units to homebuyers.
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 not worth 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 had 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 the 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 the one-time restructuring of the loans without NPA classification,” a developer explained.
Some developers are of the opinion that 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.
In UP, especially Noida and Greater Noida, the authorities have the first charge as there are still land dues running into over Rs 1000 crore. “We are looking at how we can structure the Fund so that the first charge does not affect it but that is a matter of structuring. There is also uncertainty over interest charges to be waived off during the zero period. Discussions on these issues are on with the two authorities,” sources said.
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