IN APRIL 2013, when Mumbai resident Sarita Iyer booked a house in Rivali Park Wintergreens project by CCI Projects Private Ltd., an associate company of Cable Corporation of India, she had no idea that her quest for a dream home will turn into a nightmare fraught with anxiety, monetary loss, legal fights and protests.

According to the builder-buyer agreement, Iyer was supposed to get possession in February 2016, almost three years after the booking. However, she and fellow buyers in the project — 708 units over seven acres — were shocked when the builder cited paucity of funds as the reason behind stalled construction even though most buyers had paid more than 90% cost of their units. “The builder kept saying he has no funds. We did not know whether the money had been siphoned off. We filed multiple cases with Real Estate Regulatory Authority (RERA) and other forums,” Iyer tells Fortune India, remembering those years as “full of struggle.”

For almost three-and-a-half years, the buyers kept running from pillar to post. The efforts went in vain until November 2019 when Central government launched the Special Window for Affordable and Mid-Housing (SWAMIH) fund to complete stalled housing projects. SWAMIH is Category II Alternative Investment Fund (AIF) registered with Securities and Exchange Board of India with ₹10,000 crore Central funding and mandate for raising ₹25,000 crore. It funds projects that have positive net worth and are registered with RERA. The net worth of a project is positive when value of receivables and unsold inventory is higher than completion cost and liabilities. Funding is capped at ₹400 crore per project.

The fund, managed by SBI Capital Ventures, came to the rescue of the buyers. Despite disruptions caused by the pandemic, it completed 640 units in the project within one-and-a-half years, by February 2021. On May 13 last year, finance minister Nirmala Sitharaman presided over the virtual ceremony to hand over the keys to the buyers of Rivali Park Wintergreens, which became the first project to be funded by the SWAMIH fund.

Since then, there has been no looking back for the fund. An upbeat State Bank of India (SBI) Chairman Dinesh Khara tells Fortune India that the fund has completed 14,000 stalled housing units in 33 projects till date. Builders will hand over these units to buyers. “We expect 20,000 homes to be completed every year for the next four years. Preliminary approvals have been granted for 93,949 units in 160 projects involving ₹42,000 crore. Final approval has been given for 75,742 units across 127 projects involving cost of ₹34,073 crore,” says Khara.

Nearly 1.7 lakh stuck houses are in line for completion. This is almost one-third of stalled units in major markets of the country. Some of the big projects where the fund has been able to deliver units are SS Leaf, Gurgaon (700 units), Rajkamal Pride, Mumbai (75), Windlass River Valley, Dehradun (640), Green Meadows, Jaipur (348), Shree Vardhaman Flora, Gurgaon (575) and Marquise, Bangalore (111).

Putting life in so many projects during the pandemic despite high input costs is not a mean feat. The finance minister wrote a letter of appreciation to Irfan A. Kazi, chief investment officer, SWAMIH Investment Fund, SBI Capital Venture and the entire team on May 15 last year. “The high quality appraisal of these stressed housing projects, providing last-mile funding for completion and rigorous post-sanction monitoring by your team for ensuring timely delivery of the affordable homes have boosted confidence of home buyers, bankers and developers,” she said.


Operating Model

Khara says the fund has raised ₹10,037 crore from Central government and 14 other institutions, including Life Insurance Corporation and some banks, including SBI. After the project is approved for funding, disbursement is linked to construction and procurement milestones. Payments are linked to invoices. No money is paid to the developer. “The fund controls expenditure. The funding is based on progress of the project. The only payment made to the builder is the amount due as tax. In that case, further disbursements start only after the fund gets the tax challan,” says a top government source.

The fund even pays salaries to staff till it is handling the project and deploys sale proceeds for construction work. Now, the question is, with so much residual cost-intensive activity, how does it earn returns? “SWAMIH provides capital for construction and completion of net worth positive projects. It primarily structures its investments in the form of non-convertible debentures which have priority charge on project assets and cash flows,” says Arun Malhotra, founding partner and portfolio manager, CapGrow Capital Advisors.

When the project is complete or nearing completion, the fund starts redeeming its investment from idle cash in the project escrow account. “Any project with positive net worth will have 15-20% margins. That takes care of additional cost due to SWAMIH funding,” says the government source.

So, the way the model works is that the builder foregoes the margin and gets funding in return for the idle project, which would not have got funding from anywhere or got it at exorbitant rates, making it unviable. “Investors are getting 11-12% return, which is reasonable. The builder cannot raise funds from banks and NBFCs as he has not paid in the past. So, rather than letting the project languish, the government is ensuring that consumers do not suffer, without bailing out the banks and builders. Collaterally, banks and builders also stand to gain,” says Anuj Puri, chairman, Anarock Property Consultants Pvt. Ltd. The SBI chairman did not disclose returns but said the fund has started profitable exits from a number of projects.

A Boon To Realty, Economy

Anarock’s June report points out that the value of the 4.79 lakh units launched before 2014 which are now stalled or inordinately delayed is ₹4,48,129 crore. This is about 3% of national GDP. With several of these projects coming back to life, there is a huge potential for unlocking value, kick-starting economic activity and strengthening bank balance sheets. Anarock’s Puri says he has seen a rise in confidence of the industry. “One thing that has changed the sector is the SWAMIH fund. Most projects are coming at the same time, creating a huge traction in procurement,” he adds. Vikas Wadhawan, group CFO,, and, says the fund will help the real estate sector grow. “Industry stakeholders should consider this as an opportunity to focus on timely project completion and technology adoption.” .

Other Models, Way Forward

Some of the other avenues available to people whose money is stuck in real estate projects are Insolvency and Bankruptcy Code (IBC), Companies Act and Supreme Court. So far, IBC has not been very successful in resolving insolvency cases pertaining to real estate construction companies. For instance, Jaypee Infratech has been languishing in National Company Law Tribunal and Appellate Tribunal for five years, leaving about 30,000 home buyers in the lurch.

In case of Unitech, whose board was superseded by Central government after a 2020 Supreme Court order, there is no progress. The number of buyers in Unitech is close to 10,000. For 45,000 buyers of Amrapali, things seem to be moving in the right direction, with Supreme Court appointing NBCC to implement the projects.

While SWAMIH fund is helping buyers, there is a need to create a feasible model for projects having negative net worth too for helping buyers in cases where the builder has either gone bankrupt or siphoned off the money. Government could look at additional FAR for new bidders, or vesting of vacant land after change in the layout, to make such projects feasible for rebid. SWAMIH fund is a step in the right direction. The need is to build on it for the benefit of home buyers and the entire economy.

Dinesh Khara, chairman, State Bank of India
Dinesh Khara, chairman, State Bank of India

'Will build 20,000 stalled housing units every year': Dinesh Khara, chairman, SBI

What is the mandate of SWAMIH Fund?

The clear focus is on funding stuck real estate projects that are cash positive. It provides priority debt financing to revive stalled residential projects.

How does it function?

The fund identifies projects, evaluates them and invests on the basis of cash flow. The focus is on stressed home buyers. Projects are funded to provide relief to home buyers irrespective of developers’ background. The SWAMIH team acts as virtual CFO of developers and not as a lender, ensuring that money goes where it is required. A total of 14,000 homes have been completed; we expect 20,000 to be completed every year over the next four years.

How much return has the fund generated so far?

I can say that profitable exits have already commenced. In 19 investee companies in which we could start getting some money back, we have completely exited from eight companies.

Is SWAMIH a better model for stalled housing projects than IBC?

IBC focuses on resolution where a buyer will try to assess IRR (internal rate of return) and buy at lowest possible price. So, that is not going to solve the problem. The problem is people’s money getting stuck. The idea is to address challenges of home buyers.

Can SWAMIH help negative net worth projects?

I won’t be able to comment as its mandate has been clearly articulated and the primary condition is positive net worth. The risk modelling in both scenarios (positive and negative risk modelling) is different. All investors may not have that kind of risk appetite.

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