The government’s plan to extend last-mile funding to complete stuck housing projects has been badly hit by the coronavirus pandemic, as offtake under an Alternate Investment Fund (AIF) has been only about a fifth of the Rs 5,000 crore either approved or earmarked for about three dozen projects, sources told FE.
The fund was announced on November 6, 2019 and raised Rs 10,530 crore from 14 investors, including LIC, HDFC and SBI, when it announced its first close in December. The plan was to have a Rs 25,000 crore fund, with contribution of both the government and other investors.
Commenting on the funding, SBICAP Ventures, an arm of SBI Capital Markets that is entrusted by the government to manage the fund, said: “Disbursements are a function of the completion of conditions specified, as part of the approval and also depend on the pace of construction. Given the Covid-19 outbreak, there is no construction activity happening, despite the funding made available by us and that has slowed down disbursements.” Even documentations and other aspects of due diligence have been hit by the crisis, senior industry executives said.
While it didn’t specify the disbursement amount, it said the Fund has a two-stage approval process. Initial approval has been granted to 31 projects by the fund’s investment committee, while six projects have received final approval for disbursement. “Together they would amount to an aggregate investment of more than Rs 5,000 crore and provide for the completion of about 40,000 home units,” the SBICAPS spokesperson said. “As a policy to protect the interest of our investee companies, we do not disclose the individual names of the developers or the amounts disbursed,” he added.
Additionally, the fund is in talks with relevant entities to facilitate the approval process for more than 100 deals that are being worked upon to complete the information required for their approval. “These developers are also facing issues presently in terms of providing the requisite information, while the fund is facing challenges in terms of physical verification and documentation thereby slowing down the process during the Covid lockdown,” it said.
The government had pledged a total of Rs 10,000 crore for this purpose, as it wanted to kick-start the investment cycle in residential projects and deliver houses to people who have been humbled by the double whammy of undelivered homes and regular repayment of home loans. It was also supposed to boost private consumption once houses are delivered.
According to a recent industry estimate, as many as 4.58 lakh housing units were facing delayed delivery across 1,509 stalled projects.
Announcing its support to stuck housing projects in September last year, the finance ministry had said the new fund would have an NIIF-like structure where the government would contribute half of the corpus and other investors, including foreign ones and domestic financial institutions, will do the rest. It will be run by professionals, who will offer funds to the stuck projects that have not been declared non-performing assets or dragged to the NCLT. It will help complete only affordable and middle-income housing projects.