The Union Cabinet chaired by Prime Minister Shri Narendra Modi yesterday approved the establishment of a 'Special Window' fund to provide priority debt financing for the completion of stalled housing projects that are in the Affordable and Middle-Income Housing sector.
For the purposes of the fund, the government shall act as the Sponsor and the total commitment to be infused by the Government would be up to INR 10,000 crore.
The fund will be set up as a Category-II AIF (Alternate Investment Fund) debt fund registered with SEBI and would be professionally run.
For the first AIF under the Special Window, it is proposed that SBICAP Ventures Limited shall be engaged to be the Investment Manager.
This fund would in turn would provide relief to developers that require funding to complete a set of unfinished projects and consequently ensure delivery of homes to the home-buyers.
Since the real estate industry is intrinsically linked with several other industries, growth in this sector will have a positive effect in releasing stress in other major sectors of the Indian economy as well.
The Hon'ble Finance Minister on September 14, 2019 had announced that a special window for affordable and middle-income housing will be created. This special window will provide last mile funding for housing projects which are stressed.
Subsequently, Inter-ministerial consultations and several stakeholder consultations were held with the housing industry including Housing Finance Companies, Banks, NBFCs, Investors, and Real Estate Developers. Problems being faced by home buyers, developers, lenders, and investors were ascertained that could be addressed through the Special Window.
FAQs ON SPECIAL WINDOW FOR FUNDING STALLED AFFORDABLE AND MIDDLE-INCOME HOUSING PROJECT AS APPROVED BY THE UNION CABINET ON NOVEMBER 6, 2019
Answer: The Government shall act as the sponsor to the proposed fund and shall have the authority and responsibility as specified under SEBI (AIF) Regulations, 2012. Whereas, the investment manager is responsible for fund raising, investments and managing the fund team.
Answer:The total commitment of funds to be infused by the Government in the affordable and middle-income group housing sector through the Special Window would be up to INR 10,000 cr. The fund is seeking matching contributions from Banks, LIC and others to generate a total corpus of around INR 25,000 cr.
Answer: For the first AIF under the Special Window, SBICAP Ventures Limited shall be engaged to be the Investment Manager.
Answer: AIFs created/funded under the Special Window would solicit investment into the fund from the Government and other private investors including cash-rich financial institutions, sovereign wealth funds, public and private banks, domestic pension and provident funds, global pension funds and other institutional investors.
Answer: Yes. Based on the inputs received from the stakeholders the Government has decided to increase the scope of investments to include NPA as well as NCLT projects. All applications for financing would be reviewed by the investment committee of the fund for approval, after due-diligence and discussions with existing lenders and legal advisors.
Answer: Any or all projects undergoing corporate insolvency resolution process before the NCLT can be considered for funding through the Special Window upto the stage where the resolution plan for such insolvency resolution process has not been approved / rejected by the committee of creditors.
Answer: No. The focus of this Special Window will be on the projects that are stalled for lack of construction funding. It shall also look at projects that are NPAs or undergoing NCLT proceedings, that can commence construction immediately after funds are made available.
Answer:Funding shall be provided to the projects that meet the following criteria:
Answer:For the purposes of the first fund under the Special Window, Affordable or Mid-Income Housing shall be defined to include any housing projects wherein housing units (to be specified in detail in the fund documents) do not exceed 200 sq. m. RERA carpet area and are priced as below:
Answer: Net-worth positive projects for the purpose of funding through the Special Window shall mean those projects where the value of receivables plus the value of unsold inventory is greater that the completion cost and outstanding liabilities at the project-level.
Answer: Please refer to Answer No. 9
Answer: This price does not include any additional charges for social amenities, parking, housing society, brokerage, deposits, registration and stamp duty charges.
Answer: Carpet Area shall have the meaning as assigned to it in clause (k) of section 2 of RERA i.e. Carpet Area means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
Answer: The fund will invest in any project that meets its investment objective of completing housing units with size less than 200 sq. mts. and the city-wise pricing norms subject to a cap of INR 2 cr.
Answer:The Portfolio Investments by the Fund shall be spread across India with no geographical restrictions. There will be caps at project level, developer-level and city level as per standard risk management practice.
Answer: As per industry estimates, 90% of the stalled projects are under the affordable and mid-income segment.
Answer: This will be done as per RBI guidelines and Bank Board approved policies.
Answer: Revival of stalled projects will lead to early completion and timely possession of homes for home-buyers who have invested their hard-earned money.
Answer:The Special Window shall provide capital for completion of construction of stalled projects. The Investment Manager along with developer / appointed project management companies shall ensure that the end use of funds is only for the purpose of completing the project. Standard financial controls maintained by RERA will be adopted.
Answer: The fund will supervise the disbursement of capital and shall monitor the execution of projects by the developer directly or through third party services. Existing lenders would be consulted as part of the sanction process.
Answer: The investment Manager shall make a detailed investment review including inputs provided by external due diligence agencies. This monitoring mechanism will be part of the contractual arrangement with the developers as part of funding and approval of the fund investment. After the documentation is completed, disbursements would happen.
Answer:As per industry estimates, in the stalled category, there are about 1509 housing projects comprising of approximately 4.58 lakh housing units. Projects meeting the investment eligibility criteria will be financed. The maximum finance for any single project will be INR 400 crore. There will be caps put in place for a single developer and for any single city as well as part of the final detailed scheme.
Answer: The focus of the Special Window is on mid and affordable segment. However, alleviating the stress for the developers in this segment may have indirect collateral benefits for the entire real estate sector including luxury segment.
Answer: The objective of the Special Window is to complete the construction of the stalled projects at the earliest. Accordingly, funding would be structured to meet the construction and sales schedule of the relevant projects.
Answer: As part of the investment review, the Investment Manager will take a call if there is any need to change the developer for the project.
Answer:The Investment Manager, with help of appointed project management companies and appropriate financial controls, shall be responsible to ensure that the end use of monies of the fund is for construction and completion of the projects.
Answer: Please refer to Answer No. 22.
Answer:The fund expects to primarily structure its investments in the form of non-convertible debentures subject to legal, regulatory or other considerations,
Answer:Taking into account the stress in the housing and construction industry, many measures have been undertaken by the Government in the past to boost the housing sector, such as:
Answer: Home-buyers will be required to work with their financing institution (NBFC/HFC/Banks) to honour their obligations to provide balance instalments of home loans, enabling early completion of the project.
Answer: Home-buyers are advised to reach out to their respective lending institutions to seek necessary guidance for additional borrowing or revival of their existing home loans within the existing legal and regulatory framework and standard board approved policies of the lending institutions.
Answer: Those project will continue to have recourse to existing alternatives for funding, restructuring and resolution.
Answer: The Investment Manager shall determine the returns based on the risk profile and specifics of each project.
Answer: The capital provided by the fund would be used only for completion of the stalled projects. This should benefit all the stakeholders in the project.
Answer: Primary responsibility will be of the developer. However, the Investment Manager may also take a call on the necessary actions to be taken on a project to project basis.
Answer: The Investment Manager shall first complete an internal financial analysis to see if the project meets the fund’s investment criteria. This shall be further supplemented by external due diligence agencies to cover areas such as title, financial, real estate and legal, among others, including consultation with existing lenders.
Answer: Project and developer selection shall be the prerogative of the Investment Manager and the Investment Committee of the fund. The investors including the Government will not be interfering with the financial objectivity of that process. The decision of the Investment Committee shall be guided by the investment objective of the fund as agreed in the contribution agreement entered into with the investors. Projects involving fraud or diversion may not be considered by the Fund.