Finance Ministry Approves Banks to Fund Struggling Real Estate Ventures After RBI Nod

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    Banks are now authorized to inject funds into stagnant real estate ventures to revive their viability, as revealed by a high-ranking official from the Finance Ministry. This step necessitates prior approval from the Reserve Bank of India. Additionally, it has come to light that the corpus of the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund remains partially unutilized.

    The Indian Banks’ Association (IBA) approximates that a staggering 4.12 lakh distressed housing units, involving a substantial ₹4.08 lakh crore, are adversely impacted across various stalled real estate projects. Notably, around 2.40 lakh of these struggling dwelling units are concentrated in the National Capital Region (NCR). Should 75 percent of these beleaguered units be successfully addressed, it would usher in approximately three lakh new units into the housing sector. The resolution of these distressed units not only aids the middle and lower-middle-class population in obtaining homes for which they have already made considerable payments but also promises a considerable boost to economic activity and overall growth.

    A committee comprising 14 members, led by former CEO of NITI Aayog, Amitabh Kant, has been dedicated to assessing stalled real estate ventures and proposing strategies for their completion. The committee submitted its report on August 21 to the government. Their findings attribute the project stress primarily to “lack of financial viability,” which, in turn, has led to cost overruns and delays. The official emphasized that the SWAMIH Fund would exclusively target projects that can be made viable through its assistance. This entails providing financial support to developers grappling with stalled projects via the SWAMIH fund and permitting banks to infuse funds, subject to RBI approval. Furthermore, provisions have been outlined to classify loans as standard assets for individuals unable to repay due to stalled projects.

    It’s important to note that the SWAMIH fund, established with the aim of completing distressed and stalled residential projects, is touted as India’s largest social impact fund in this category. Sponsored by the Finance Ministry and managed by SBICAP Ventures Ltd., this unprecedented fund has amassed ₹15,530 crore thus far. The fund prioritizes debt financing to facilitate the completion of stressed, brownfield, and Real Estate Regulatory Authority (RERA) registered residential projects within the affordable and mid-income housing segment.

    As of March, SWAMIH has granted final approvals to approximately 130 projects, with sanctioned amounts totaling over ₹12,000 crore. Since its inception in 2019, the Fund has already concluded construction of 20,557 homes and aims to finalize an additional 81,000 homes within the next three years across 30 tier 1 and 2 cities.

    According to the Finance Ministry, the Fund has maintained rigorous oversight, successfully completing construction in 26 projects and yielding returns for its investors. It has also significantly contributed to the growth of ancillary industries within the real estate and infrastructure sector, unlocking liquidity exceeding ₹35,000 crore, the Ministry added.

    Also read: Ministry Urges Indian Real Estate Developers to Embrace Bank Financing for Growth

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