The Special Window for Affordable & Mid-Income Housing (SWAMIH) under the Government of India recently marked a significant milestone by completing its initial residential project. The said project, Rivali Park, situated in suburban Mumbai, received the distinction of being the first housing project in the country to be funded through the SWAMIH Fund.
SWAMIH Fund: Understanding Its Role and Function
The SWAMIH Fund is a government-backed financial reservoir established as a Category-II AIF (Alternative Investment Fund). It’s a debt fund registered with the Securities and Exchange Board of India (SEBI), launched in 2019. The primary objective of creating this investment fund was to complete the construction of stalled housing projects registered with RERA. These are affordable and mid-income category projects, stuck due to shortage of funds.
The Investment Manager of the SWAMIH Fund is SBICAP Ventures, a wholly-owned subsidiary of SBI Capital Markets, which in turn, is a wholly-owned subsidiary of the State Bank of India. The Secretary, Department of Economic Affairs, Ministry of Finance, sponsors the fund, representing the Indian government.
RERA: A Regulatory Initiative Targeting Real Estate Sector
The Real Estate (Regulation and Development) Act, commonly known as RERA, was passed by the Parliament in 2016 and came into effect on May 1, 2017. RERA is aimed at establishing a regulatory authority in each state to oversee the real estate sector. It also serves as an adjudicating body that fast-tracks dispute resolution. The Act intends to protect home-buyers and stimulate investment in real estate by promoting efficiency and transparency in real estate transactions.
Alternative Investment Fund: A Private Investment Vehicle
An Alternative Investment Fund (AIF) is defined as a privately pooled investment vehicle collecting funds from sophisticated investors, both Indian and foreign, for investment according to a defined policy that benefits its investors. AIFs can be formed through a company or a Limited Liability Partnership (LLP). However, they exclude funds managed by the SEBI (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999, and any other SEBI regulation. Family trusts, employee welfare trusts, and gratuity trusts also fall outside its purview.
Classification of AIFs: Categories I, II, and III
Category-I AIFs invest in businesses with high growth potential such as StartUps and Small and Medium Enterprises. These ventures positively impact the economy by creating jobs and enhancing output. Infrastructure Funds, Angel Funds, Venture Capital Funds, and Social Venture Funds are included in this category.
Investments in equity securities and debt securities fall under Category-II AIFs—those not already under Category I and III. The government does not offer any concessions for investments made in Category II AIFs. Real Estate Funds, Debt Fund, and Private Equity Funds are examples of this category.
Lastly, Category-III AIFs are quick-return funds employing complex and diverse trading strategies to reach their objectives. Hedge Funds and Private Investment in Public Equity Funds belong to this category, for which the government does not provide specific concessions or incentives.
Source: PIB