Home / News / India /  SBICAP Ventures reduces rate of return on funding stalled projects to 12%

MUMBAI: In some relief for the real estate sector during the covid-19 pandemic, alternative asset manager SBICAP Ventures Ltd has decided to reduce its internal rate of return (IRR) on funding of stalled affordable housing projects by 300 basis points to 12%.

The Special Window for Affordable and Mid-Income Housing or SWAMIH Investment Fund I is being managed by SBICAP Ventures. “We have taken another step forward to support the real estate sector...Given the extraordinary circumstances, SWAMIH Investment Fund I shall now provide construction funding at a 12% IRR," wrote Irfan A Kazi, chief investment officer, SWAMIH Investment Fund I in a post on LinkedIn.

SBICAP Ventures is a wholly-owned subsidiary of SBI Capital Markets Ltd.

In November, the Union Cabinet had approved a special window fund to provide priority debt financing for completion of stalled housing projects that are in the affordable and middle-income housing sector. The government had said it would act as the sponsor and committed infusing up to 10,000 crore.

“This fund would in turn would provide relief to developers that require funding to complete a set of unfinished projects and consequently ensure delivery of homes to the home-buyers. Since the real estate industry is intrinsically linked with several other industries, growth in this sector will have a positive effect in releasing stress in other major sectors of the Indian economy as well," the finance ministry had said in a statement on 7 November. It had said as per industry estimates, 90% of the stalled projects are in the affordable and mid-income segment.

Demand and liquidity crunch had been haunting the real estate sector even before the nationwide lockdown began on 25 March. The pandemic has now aggravated the slump. Real estate sector lobby body Credai in a letter to Reserve Bank of India (RBI) governor Shaktikanta Das on 26 May had urged for transmission of reduced repo rate into lower rates for non-banking financial companies (NBFCs) and housing finance companies (HFCs).

Shishir Baijal, chairman and managing director, Knight Frank India, in a statement on Sunday, said the IRR reduction is a positive move for the stressed real estate sector and will potentially allow more development companies to approach the fund.

Baijal believes the announcement has come at an opportune time when the lockdown is being eased out, an early deployment will allow developers to restart construction and complete their projects at the earliest possible time.


Shayan Ghosh

Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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