Banks can finance stalled real estate projects after getting permission from RBI, a senior finance ministry official said. He also informed that the SWAMIH (Special Window for Affordable Housing and Moderate Income Housing) fund pool has not been fully utilized.
The Indian Banks Association (IBA) estimates that 4.12 lakh stressed residential units are affected by various stalled real estate projects worth Rs 4.08 crore. Approximately 240,000 of these stressed residential units are located in the NCR. If 75% of stressed units are resolved, this would add approximately 300,000 units to the housing sector. The resolution of these stress units will help the middle and lower middle class get housing for which they already pay a lot. Furthermore, it will provide an important impetus to economic activity and growth.
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A 14-member committee chaired by former NITI Aayog chief executive Amitabh Kant submitted its report to the government on August 21. The committee was formed to review stalled real estate projects and propose ways to complete them. The committee concluded that the main reason the projects were under pressure was a “lack of financial viability”, leading to cost overruns and schedule delays.
“We will only accept projects that can be realized through the SWAMIH fund. The report is divided into two parts. First, if the project stalls, the developer will get funding through the SWAMIH fund and the bank can also invest the money after getting permission from the RBI. Second, for those individuals whose loans are stuck and unable to repay, we also have regulations in place to classify them as standard assets,” the official said, adding that the main body of the fund has not been fully utilized.
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The government claims that SWAMIH is India’s largest social impact fund, set up specifically to complete stressed and stalled residential projects. The fund was initiated by the Ministry of Finance and managed by SBICAP Ventures Ltd. The fund has no precedent or comparable peer funds in India or the global market. To date, the company has raised Rs 1,553 crore to provide senior debt financing for stressed brownfield and Real Estate Regulatory Authority (RERA) registered residential projects under the affordable housing category.
As of March, SWAMIH has given final approval to about 130 projects with sanctions exceeding Rs 1,200 crore. In the three years since its establishment in 2019, the fund has completed 20,557 housing units, and plans to complete more than 81,000 housing units in 30 first- and second-tier cities in the next three years.
According to the Ministry of Finance, the fund has been able to complete the construction of 26 projects and generate returns for its investors thanks to strict controls and a good track record of projects and promoters. The fund has also played a key role in the growth of many ancillary industries in the real estate and infrastructure sectors, having managed to unlock over Rs 35,000 crore of liquidity, the ministry added.