A few months back the government of India has announced last-mile fund for stalled real estate projects in the tune of INR 25,000 crore to bring back lost confidence in the sector and troubled homebuyers to get their housing units. Following the creation of stress fund for stalled projects, realty developers do not show much interest to get funds due to its high return expectations.
Lately, SBI Capital managed last-mile fund witnessed a sudden spike in the number of applications amidst lockdown for funds for stalled projects. SBI Capital received over 100 new applications from realty developers in just the last 15 days post reduction in its return expectations to 12 percent from earlier 15%-17%.
Post resumption of construction activity amidst lockdown relaxation, realty developers, and promoters’ queue before several lenders for fresh liquidity. The industry has witnessed new demand for liquidity from existing lenders including NBFCs (Non-banking Financial Companies) and AIFs (Alternate Investment Funds) and they are offering fresh loans at the rate of around 18 percent.
SBI Capital managed stress fund not just received applications from tier-I cities like Mumbai, Delhi-NCR but also from tier-II cities such as Jaipur, Ahmedabad for funds to complete stalled projects. Under the last-mile fund, SBI Capital has sought financing proposals in the rage of INR 10 crore to INR 300 crore for each stalled project.
The applications of financing proposals are under process, fund house is analyzing each proposal and final due diligence leading to any commitment is expected to be taken post lockdown. The government has capped maximum finance at INR 400 crore for any single stalled project across the country.
During lockdown under Special Window for Completion of Construction of Affordable and Mid-Income Housing Projects (SWAMIH I) has given green signal for six additional projects worth INR 1,000 crore with this taking total disbursal of funds to over INR 1,500 crore.
Due to the ongoing COVID-19 pandemic crisis industry might witness a greater number of stalled projects owing to the liquidity crunch. As per government assessment, over 4.58 lakh stalled housing units in 1,509 residential projects stuck across the country.
Industry experts are expecting quick disbursal of stress funds for stalled project completion and further relaxation in lockdown will witness a surge in demand and recovery in real estate.