The SBICAP Ventures managed last-mile fund for stressed real estate projects has received over 100 new applications from realty developers in the last one month, said two persons with direct knowledge of the development.
A significant part of these applications seeking financial support have been made during the last 15 days after the fund has lowered its return expectations to 12% from earlier 15%-17%.
The newly generated demand for liquidity can be attributed to existing lenders including non-banking finance companies (NBFCs) and Alternate Investment Funds(AIFs) offering new loans at around 18% in the current Covid19-led crisis.
“Given the liquidity squeeze, most project financiers are saying they don’t have money to top up loans. Even if they are providing additional funds for the project completion that is being done at a higher rate,” said one of the persons mentioned above.
Apart from tier I cities that were already looking for funds to complete stalled projects, the new applications are flowing in from tier II cities like Jaipur.
The new financing proposals have sought investments ranging from Rs 10 crore to Rs 300 crore for each stalled project.
While the fund has started analysing these proposals, the final due diligence leading to any commitment will be firmed up once the lockdown ends completely.
The fine print provided by the government states that the maximum finance for any single project from this fund will be capped at Rs 400 crore.
ET’s email query to SBICAP Ventures remained unanswered until the time of going to press.
So far, the fund--Special Window for Completion of Construction of Affordable and Mid-Income Housing Projects (SWAMIH I)--has cleared investments worth over Rs 1,000 crore for six additional projects during the lockdown period taking its total commitment to over Rs 1,500 crore.
The ongoing Covid-19 crisis may result in more projects getting stalled due to liquidity crunch.
However, clarity on this will emerge only after November as the Reserve Bank of India has already announced a 6-month moratorium on all term and working capital loans.
Apart from this, Real Estate Regulatory Authorities (RERA) across several states have extended the deadlines for project completions.
According to government estimates, there are 4.58 lakh stalled housing units in 1,509 residential projects stuck across the country.
The Rs 12,500-crore fund, with green-shoe option of additional Rs 12,500 crore, aims to provide financing to enable completion of stalled housing projects and ensure delivery of apartments to troubled homebuyers.
June 15, 2020