After much speculations, the government has finally announced a much-needed bailout fund for stalled real estate or housing projects across the country. The Union cabinet on Nov. 7, Wednesday, approved the proposed setting up the Alternative Investment Fund (AIF) for providing last-mile funding to some 4.6 lakh housing projects that are stuck across the country.
As per the series of announcements made by finance minister Nirmala Sitharaman, the total fund size to be granted is estimated over Rs. 25, 000 crore with Central Government providing Rs. 10, 000 crore while the rest Rs. 15, 000 crore will be pumped by SBI and LIC in the due course of time.
The Alternative Investment Fund (AIF) can be utilized even by the projects which have been declared non-performing assets or are facing insolvency proceedings.
“Even if the project is a NPA can it be covered under this scheme. Even if a project is under arbitration of NCLT, but only if the project has not been announced as liquidation worthy, can it be covered under this AIF. The main criteria to be covered under this scheme is that the project’s net worth must be positive,” Finance Minister said.
Here are some facts about AIF:
- The fund is not restricted to projects in Delhi-NCR or Mumbai. Every project in any part of the country can avail of the funding if it meets the criteria.
- AIF funds would be entrusted to professional investment managers. For the first AIF under the Special Window, it is proposed that SBICAP Ventures Limited shall be engaged as the Investment Manager.
- SBI Cap will manage the real estate AIF initially through an escrow account. It will prioritize the projects as per viability and the funds for any project will be deposited into the escrow of that particular project in a phased manner depending on the rate of completion of construction.
- Realty AIF will fund incomplete projects where housing units valued are less than Rs 1 crore in non-metro areas and worth Rs 2 crore in Mumbai and upto Rs 1.5 crore in Delhi-NCR, Chennai, Pune, Hyderabad, Ahmedabad.
- A detailed Investment Policy will be laid down to guide the selection of projects to be financed through a detailed due-diligence process that will include legal due-diligence, title due diligence, micro-market analysis, financial analysis.
- The final decision will be taken by the Investment Committee of each Fund comprising of experienced professionals and industry experts.
- The Investment Manager will be responsible to ensure that the funds are used only for construction through appropriate safeguards mandated by RERA and also through deployment of external project monitoring agencies.
- Funding shall be provided to the projects that meet the following criteria:
- Stalled for lack of adequate funds
- Affordable and Middle Income Category
- Net worth positive projects (including NPAs and projects undergoing NCLT proceedings)
- RERA registered
- Priority for projects very close to completion.
Click here to read FAQs on real estate stress asset fund as approved on Nov. 6.