In November 2019, the Centre had announced setting up the Rs25,000 crore SWAMIH Investment Fund to provide relief to developers with unfinished projects to ensure delivery of homes to buyers
MUMBAI: A distressed real estate fund, set up by the Centre under the Special Window for Affordable and Mid Income Housing (SWAMIH) scheme to complete stalled projects, is gearing up to deliver its first batch of 17 housing projects, comprising more than 6,000 units by the end of fiscal 2022.
It has also sanctioned around 165 projects for completing 1 lakh housing units over the next few years. Of these, 55 have received final approvals for completing 35,000 units, the fund's investment officer Irfan Kazi said in an analyst call organized by Macquarie Research.
SWAMIH is a category 2 Alternate Investment Fund (AIF) with limited ability to take leverage.
Unlike other private equity funds, Kazi said, the fund only looks at RERA-registered stressed and stalled projects with a positive net worth. After consultation with the government, the fund had brought down the IRR from 15% to 12% after several projects could not meet the net worth criteria.
Kazi said there was significant reluctance from lenders, refusing to take second charge of the project once the fund comes in.
“According to the regulations, SWAMIH takes first charge on assets and cash flows which means they get paid first once the project is completed. Lenders are worried that acceding charge would result in change in asset classification, higher provisions etc," he said.
Among lenders, private sector banks have been more proactive about completing stuck projects as compared to public sector banks. That said, the fund looks at projects with no lenders, where the developer was able to generate significant amount of sales initially but later slowed down, he added.
In November 2019, the Centre had announced setting up the Rs25,000 crore SWAMIH Investment Fund to provide relief to developers with unfinished projects to ensure delivery of homes to buyers.
The aim was to help complete over 1,500 stalled housing projects, including those that have been declared non-performing assets (NPAs) or had been admitted for insolvency proceedings. The fund has 14 investors, with the government holding 50% in the fund, Life Insurance Corp. and State Bank of India each having 10%, and the rest with public and private-sector players.
According to Kazi, there are around 4.5 lakh units spread across 1,600 stalled projects in the country. Most of these projects are in the Mumbai Metropolitan Region--at 41%--and the National Capital Region, at 24%.
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