Banks can fund stalled real estate projects after taking permission from the Reserve Bank of India, a senior Finance Ministry official has said. He also informed that SWAMIH (Special Window for Affordable and Mid-Income Housing) fund corpus is yet to be fully utilised.
The Indian Banks’ Association (IBA) has estimated that 4.12 lakh stressed dwelling units involving ₹4.08 lakh crores are impacted in various stalled real estate projects. About 2.40 lakh stressed dwelling units of this are situated in NCR. If 75 per cent of these stressed units are resolved, it will add about three lakh units to the housing sector. The resolution of these stressed units will assist the middle and lower middle class in getting houses for which they have already paid a substantial amount. In addition, it will provide a major impetus to economic activity and growth.
A 14-member committee chaired by former NITI Aayog CEO Amitabh Kant, which was constituted to examine stalled real estate projects and recommend ways to complete them, submitted its report on August 21 to the Government. The committee concluded that the main reason for the stress in these projects was the “lack of financial viability”, which had led to cost overruns and time delays.
“We will take only those projects which could be made viable through the SWAMIH Fund. The report has two parts. Firstly, developers will be given money, if there is a stalled project, through the SWAMIH fund and banks can also put in money after taking permission from RBI. Secondly, individuals whose loan is stuck and can’t repay the money, for them also we have made provision to classify it as standard asset,” the official said while adding that the fund corpus has not been fully utilised.
The government claims SWAMIH is India’s largest social impact fund specifically formed for completing stressed and stalled residential projects. The Fund is sponsored by the Finance Ministry and is managed by SBICAP Ventures Ltd. The Fund has no precedent or comparable peer fund in India or in the global markets. It has raised ₹15,530 crore so far with an aim to provide priority debt financing for the completion of stressed, brownfield, and Real Estate Regulatory Authority (RERA) registered residential projects that fall in the affordable, mid-income housing category.
As of March, SWAMIH has provided final approval to about 130 projects with sanctions worth over ₹12,000 crore. In three years since inception in 2019, the Fund has already completed 20,557 homes and aims to complete over 81,000 homes in the next three years across 30 tier 1 and 2 cities.
According to the Finance Ministry, given the robust controls and despite the track record of the projects and promoters, the Fund has been able to complete construction in 26 projects and generate returns for its investors. The Fund has also played a critical role in the growth of many ancillary industries in the real estate and infrastructure sector having successfully unlocked liquidity of more than ₹35,000, added the Ministry.