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Realty fund of Rs 12,500 crore may be fully deployed in two years
The Economic Times  |  February 12, 2020

Kailash Babar Mumbai

The government’s Rs 12,500 crore Alternate Investment Fund (AIF), which offers last-mile funding to stuck housing projects, has disbursed funds to two housing projects and expects to fully deploy its money in two years.

 

Arun Mehta, MD SBI Capital Markets and Chairman, SBICAP Ventures, told ET in an exclusive interaction on Monday that the investments would kick-start the much-awaited investment cycle in residential realty and trigger private investor interest in housing projects.

 

SBICAP Ventures, a wholly owned subsidiary of SBI Capital Markets and an alternative asset manager, has been entrusted by the government to manage the fund to kick-start stalled projects across the country.

 

Over 300 real estate developers across the country have approached the fund for financial support for their projects. Of these, 200 builders have submitted preliminary information while the fund managers have sought more information from 100 of the 200 developers. Nearly 20% applications are under active consideration while around 60 projects have not met the necessary criteria for getting financial support.

 

“At least 8 applications have received preliminary approvals, 2 applications have got the final approval while 40 projects are under active consideration. In the next stage, these projects will undergo real estate, tax, financial, forensic and legal due diligence,” Mehta said.

 

The fund has already given its final approval for 2 projects — one each from Mumbai and Bengaluru — for disbursement. These projects comprising 1,800 houses stuck in various stages of completion which will provide homes to around 9,000 people.

 

Mehta, however, declined to disclose the identity of the investees and the amount disbursed stating that this may hinder that company’s ability to negotiate terms with its vendors and contractors.

 

According to estimates, 4.58 lakh housing units are facing delayed delivery across 1,509 stalled projects. The delay has led to rising consumer activism, several litigations in consumer forums and even in the National Company Law Tribunal (NCLT).

 

The fund achieved its first closure worth Rs 10,530 crore on December 6 within a month of the government approval in November. Based on the first closing at a significantly large amount, adequate capital is available for active deployment over the next 1-2 years. Additional capital will be raised from domestic sources as well as sovereign and multilateral international institutions which typically take longer time for closure.

 

“We will be committing the first over Rs 10,500 crore in the next 12-18 months and we may start additional fund raising concurrently. However, our priority for now is to deploy the funds and push for projects’ completion,” he said while adding that the fund is receiving applications for financial support not only from developers of the projects, but also the lenders including banks and Non-Banking Finance Companies (NBFCs).

 

In the first closure, it has attracted interest from investors such as the Government of India, LIC, HDFC, State Bank of India and other major public-sector banks. The government has already committed Rs 5,000 crore to the SWAMIH Investment Fund under its aggregate commitment of Rs 10,000 crore to the special window.

 

The government is the sponsor of the SWAMIH Investment Fund I that has been set up under the Special Window for Completion of Construction of Affordable and Mid-Income Housing Projects. The tenure is around 8 years.