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 200 applications, of which four have already been approved, NAREDCO National President Niranjan Hiranandani said.
“SBI Capital has already received more than 200 applications, of which four have already been approved in the first round. These are of Rs 25 crore each and the funds should be released soon,” he said.
Hiranandani said that several financial entities are interested in investing in the fund in view of the LIFO (Last-In, First-Out) method.
The next meeting is scheduled within a week and he expects a number of stressed projects, especially those in NCR, that are 60 percent complete to benefit. “As many as 2.5 lakh apartments will benefit,” he stated.
Impact to be seen in next six to 12 months...
Experts expect the impact of the real estate stressed fund to be seen in the next six months to a year.
“These projects are stuck due to last mile funding issues, but are intrinsically networth positive. Once these funds are deployed, the actual impact is likely to be felt in the next six months to a year. Actual possessions may start happening after deployment of the fund,” Mudassir Zaidi, Executive Director- North, Knight Frank India, told Moneycontrol.
In all likelihood, projects that may have the highest impact with low fund deployment may be preferred, he stated. “Projects that are 70 percent complete and impact the largest number of buyers, especially those in the affordable and mid segment may be considered first. The social element may perhaps be considered while selecting projects.”
Fund raising
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. GoI has committed to a fund infusion of up to Rs 10,000 crore in the special window.
“Inquires have been received from developers across the country. As many as 65 percent of them are for stalled projects located in MMR and NCR,” a source said.
Earlier, sources had told Moneycontrol that as many as 14 domestic financial institutions have so far committed to the fund. “The fund is not attempting to raise more money right now, but looking at foreign funds to come forward, which may take time,” a source added.
“The strategy was to first attract interest from domestic investors and financial institutions, and 14 of them have so far committed to Rs 10,530 crore. The rate of interest would be around 15 percent, but that would again be deal specific," the source said.
Sources 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,” a source explained.
Why the fund was constituted?
On November 6, the government approved 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 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 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.
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