SWAMIH Fund 2.0

The SWAMIH Fund 2.0 has been introduced to address the ongoing challenges in India’s real estate sector. Union Finance Minister Nirmala Sitharaman announced a budgetary allocation of ₹15,000 crore for this initiative. This funding aims to complete one lakh housing units that are currently stalled. The real estate sector has faced hurdles, including liquidity issues and changing consumer preferences. The SWAMIH Fund is poised to provide much-needed relief.

What Is SWAMIH Fund?

• The SWAMIH Fund, established in 2019, focuses on debt financing for stressed residential properties.
• Managed by SBICAP Ventures Ltd, it serves as a last-resort lender for projects in distress.
• The fund primarily targets brownfield projects that are RERA registered and financially viable but require additional funding to complete.

Challenges in the Real Estate Sector

India’s real estate market has been plagued by a liquidity crunch and an oversupply of unsold units. As of August 2024, nearly 1,981 projects, amounting to over 5 lakh units, remain stalled across the country. The major cities affected include Greater Noida, Thane, and Gurugram. The Delhi-NCR region alone accounts for 44% of these stalled units.

Impact on Homebuyers

The SWAMIH Fund has already facilitated the completion of over 50,000 housing units. An additional 40,000 units are expected to be completed by 2025. This initiative alleviates the financial burden on homebuyers who are simultaneously paying EMIs and rent. Success stories, such as the Amrapali Group projects, demonstrate the fund’s effectiveness in restoring buyer confidence.

Funding and Future Prospects

The first tranche of the SWAMIH Fund raised approximately ₹15,500 crore. It has provided priority debt financing for various stalled projects. The second tranche aims to enhance this momentum and encourage further investments in the housing sector. Experts believe that involving reputable developers can expedite project completion and improve profitability.

Addressing Liquidity Issues

The SWAMIH Fund 2.0 is expected to resolve liquidity challenges faced by delayed housing projects. With a focus on digitising land records, the initiative aims to strengthen homebuyers’ confidence. This renewed commitment from the government could stimulate economic activity within the housing sector.

Questions for UPSC:

1. Examine the role of government funding in addressing housing shortages in urban areas.
2. Critically discuss the impact of the SWAMIH Fund on the Indian real estate market.
3. Estimate the potential economic effects of completing stalled housing projects on local economies.
4. Point out the challenges faced by the real estate sector in India and suggest measures for improvement.

Answer Hints:

1. Examine the role of government funding in addressing housing shortages in urban areas.

1. Government funding provides necessary capital for affordable housing projects, reducing the financial burden on developers.
2. Initiatives like the SWAMIH Fund target stalled projects, ensuring completion and delivery of housing units.
3. Funding can stimulate private investment by offering a safety net for developers, enhancing overall market confidence.
4. Government schemes can address specific demographic needs, such as low-income and mid-income families, promoting inclusivity.
5. Public funding can also facilitate infrastructure development, improving access to essential services in urban areas.

2. Critically discuss the impact of the SWAMIH Fund on the Indian real estate market.

1. The SWAMIH Fund has provided essential liquidity to distressed projects, aiding in the completion of over 50,000 units so far.
2. It serves as a last-resort lender, which can stabilize the market by reducing the number of stalled projects.
3. The fund has encouraged confidence among homebuyers, leading to increased demand for completed housing units.
4. However, the reliance on government funding may not be sustainable in the long run without structural reforms.
5. Critics argue that while it addresses immediate issues, it does not tackle the underlying causes of market instability.

3. Estimate the potential economic effects of completing stalled housing projects on local economies.

1. Completion of stalled projects can create jobs in construction and related sectors, boosting local employment rates.
2. Increased housing availability can lead to a rise in consumer spending, positively impacting local businesses.
3. Revitalized projects can enhance property values, contributing to local government revenues through taxes.
4. Improved housing conditions can attract new residents, stimulating economic growth in the area.
5. Overall, completing these projects can encourage a sense of community and stability, leading to long-term economic benefits.

4. Point out the challenges faced by the real estate sector in India and suggest measures for improvement.

1. Challenges include liquidity crunch, regulatory hurdles, and a high inventory of unsold units that hinder market recovery.
2. There is a need for clearer regulations and faster approval processes to facilitate project completion.
3. Increased transparency in transactions can build trust among buyers and investors, encouraging market participation.
4. Incentives for developers to focus on affordable housing can address the mismatch between supply and demand.
5. Collaboration between government and private sectors can lead to innovative financing solutions and better project management.