SBICAP Ventures, which is managing the government's Rs 25,000-crore special window to revive stalled housing projects, has cut the internal rate of return (IRR) expectations of this stress fund to 12 per cent from 15 per cent to provide relief to cash-starved developers.
In November last year, the central government announced a Rs 25,000-crore fund to help complete over 1,500 stalled housing projects, including even those that have been declared NPAs (non-performing assets) or admitted for insolvency proceedings.
The move is likely to help 4.58 lakh housing units across the country. Only RERA-registered projects with positive net worth will be provided funds.
'SWAMIH INVESTMENT FUND I' is the name of this special Window.
"Due to the COVID-19 situation, the entire ecosystem is being in trouble, and also the real estate industry is going through a very tough time. In this scenario, we thought we will do our bit by lending our helping hand by reducing our rates," Irfan A Kazi, chief investment officer, SWAMIH Investment Fund I, said.
Under this fund, 10 projects have received final approval so far.
"We have a two-stage approval process -- a preliminary approval and a final approval. About 50 projects have got preliminary approval and 10 projects have got final approval," he told PTI.
Asked about disbursement from this fund, Kazi said the same has not been done due to the lockdown.
The documentation process is getting delayed, he added.
In February, the government said that an investment of over Rs 540 crore in some stuck residential projects.
Reacting to the development, Shishir Baijal, chairman and managing director, Knight Frank India, said: "SBI Cap's decision bringing down the SWAMIH IRR rates from 15 per cent to 12 per cent is a positive move for the stressed real estate sector. This will potentially allow more development companies to approach the fund."
As the real estate sector struggles due to liquidity issues, this new lease of life will help the developers in the mid and affordable housing segment to fund their ongoing projects which may have suffered due to the current lockdown, he added.
"This will also provide relief to those homebuyers whose homes are delayed due to lack of funds as this will help expedite the process of buyers getting their homes," Baijal said.
The special window of Rs 25,000 crore is in the form of an alternative investment fund (AIF).
The Centre is infusing Rs 10,000 crore into this stress fund, while the remaining being provided by state insurer LIC and the country's largest lender SBI. The AIF is being managed by SBICAP.
In its market study, SBICAP has estimated that there are about 4.58 lakh stuck housing units and the aggregate funding required to complete the stalled projects is Rs 55,000 crore.
The investment manager of the fund is SBICAP Ventures Ltd, an asset management company that is a wholly owned subsidiary of SBI Capital Markets Ltd, which in turn is a wholly-owned subsidiary of the State Bank of India.
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