SBICAP Clears 4 Applications in First Round of Stressed Real Estate Funds

To boost the struggling real estate industry, earlier in September, Finance Minister Nirmala Sitharaman announced that the Union Cabinet has decided to create a Rs 25,000 Crore stressed relief real estate fund to complete stalled housing projects throughout the country. In order to be structured as an alternative investment fund (AIF), the government has agreed to form a special window. 

Taking this scheme ahead, SBICAP Ventures in the first batch has cleared four projects proposals, lending Rs 25 Crore each to real estate developers.  Although this may not be an aggressive step for the stalled real estate sector, it undoubtedly holds out hopes to lakhs of homebuyers stuck for many years. With more than 100 applications being received by the SBICAP Ventures by December 31, some banks had worked overtime to clear the applications given the urgency of the matter.

Real Estate Sector Booster Package Funds for Stalled Projects

SBICAP Ventures has been entrusted with the task of managing the planned stressed relief real state fund of Rs 25,000 Crores for the builders of the stalled projects. As per the approved plan,  the government agreed on contributing Rs 10,000 Crore as an Alternative Investment Fund (AIF). In the meantime, Rs 15,000 Crore will be adding to the fund by the State Bank of India and Life Insurance Corporation (LIC) to support over 1,600 projects with 4.58 Lakh dwelling units.

AIF funds will be deposited in tranches via an escrow account. The advantages of this fund can only be obtained for RERA approved projects that have a positive net worth. Inter-ministerial and several stakeholder consultations were held with the housing industry, including housing finance companies, banks, NBFCs, real estate developers, and investors. 

Problems that are being faced by the real estate stakeholders including the homebuyers, developers, lenders, and investors are ascertained to be addressed through the special window. In addition, project managers are going to evaluate the project to determine how long it takes. They will be responsible for the funds spent and need to deliver home to homebuyers on time. 

SBICAP Ventures has fixed the lending rate at 15%, and the loan is conditional on first paying the company's future receivables. Although the fund lends a project as the last option, it is the first person to get back its money when the inflow begins, with the last-in, first-out (LIFO) rule. The funds can also be benefitted for builders who have been declared NPA or have been considered not worthy for liquidation by NCLT. The risk assessment ahead of this has already been worked out with the banks. 

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By Govi