India is slated to launch the first completed apartments of 2021 for a $3.5 billion fund that was meant to end stalled housing projects and provide a framework on an issue that saved thousands of home purchasers and bankrupt developers.

The Alternative Investment Fund would handle around sixteen projects or more than 4,000 homes. The 'Special Window for Completion of Construction of Affordable and Mid-Income Housing Project' (SWAMIH) was announced in November 2019. 

At that time, during a period of economic recession, the credit crisis India was estimated to have $63 billion projects that were stuck. The builder could not cover its loans, compelling banks to write off their debts and alleviating what had already been one of the largest bad loan piles in the world. The Government has introduced the fund as a move to unlock the funding gutters.

Financial Aid

Nearly 159 projects with investments of around 145 billion rupees have been approved which will complete around 100,000 homes. Of these, approximately 47 projects were finally approved (50 billion rupees), while 112 were approved in the early stages where due diligence is pending. 

Expected Returns

SWAMIH takes responsibility for properties and cash flows first because they are the first ones to get money back when the projects are finished. Present lenders must consider a second payment. They invest in non-convertible debentures with a zero-coupon. All the investments are carried out at an internal return rate of 12% for projects.

Investors

There are 14 investors, 50% by the Government, and 10% by Life Insurance Corp. and State Bank of India, while the rest are public and private investors. Global funds have shown no great interest for a few reasons,  instead of residential, they choose a rental office and warehousing properties. They also expect more than 20 percent of their returns to account for uncertainties including asset classes and exchange rates. A total of 100 billion rupees collected so far and the government has assured that more is made possible if necessary.

Fund Crisis

In many cases, these funding sources work with companies that have lost their jobs and some don't even have a management workforce any longer. So due diligence can be challenging. Only some of the current lenders have received a certificate of no objection and take an extremely long time. Therefore there are few cases in courts or house owners are still waiting to approach for compensation.

Stalled Projects

As per the research, it was found that in the national capital region around 40% of the stressed projects,  25% in the Mumbai metropolitan region and some 85% of the stalled projects were in the top seven cities. However, It is a pan-Indian Fund and provides Indian developers with democratic access wherever real estate regulations and development law apply. 

SWAMIH is a fund to develop stalled properties. They are probably the quickest at parameters like installation time, fundraise time, etc. It was the fund that was initiated in a month after the official announcement in 2019  and with more than 100 transactions and nearly 150 deals are currently in effect.

By: Shailaja K