The Union Cabinet recently gave a green light for the establishment of an Alternative Investment Fund (AIF) amounting to ₹25,000 crore. The primary aim of this fund is to rejuvenate affordable and middle-income housing projects across the country that have been stalled.
About the Fund Size
Originally, the set fund size is ₹25,000 crore with the government providing ₹10,000 crore. The remaining balance would be provided by the State Bank of India (SBI) and the Life Insurance Corporation (LIC). Nevertheless, the fund is not limited to ₹25,000 crore and will likely increase as many sovereign funds have shown interest.
Management of the Fund
The fund is to be established as a Category-II Alternative Investment Fund registered with the Securities and Exchange Board of India (SEBI). SBICAP Ventures Limited (SVL), a subsidiary fully owned by SBI Capital Markets Ltd, will manage the fund.
Eligible Projects
All affordable and middle-income housing projects that are net worth positive and registered with the Real Estate Regulatory Authority (RERA) are eligible for this funding. Additionally, the projects that have not been deemed liquidation-worthy can also avail the benefits of this fund. Previously stuck projects categorized as Non-Performing Assets and those undergoing resolution under the National Company Law Tribunal will also be eligible, signaling a change from the announcement made in September 2019.
Funding Procedure
The fund will be allocated money in escrow accounts, which will only be used for completing the identified projects. The project’s receivables will be used to pay back the fund.
Expected Benefits
| Benefit | Expected Outcome |
|---|---|
| Housing projects | Revival of more than 1,600 stalled projects |
| Stress alleviation | Reduced stress for homebuyers, real estate players, and backing banks |
| Employment generation | Potential employment opportunities in cement, iron & steel industries due to increased demand |
| Commercial return | Investors in the fund can expect commercial return |
Impact on Other Sectors
The revival of the real estate sector will lead to an increased demand in the cement, iron and steel industries, thus generating employment. Moreover, the investors of the fund can expect commercial returns.
About Alternative Investment Fund
An Alternative Investment Fund (AIF) is any fund constituted in India which operates as a privately pooled investment vehicle, garnering funds from sophisticated investors, whether Indian or foreign, for investment in compliance with a defined investment policy for the benefit of its investors. An alternative investment is a financial asset that is not part of the conventional equity/income/cash categories. It includes private equity, venture capital, hedge funds, real property, commodities, tangible assets, and is regulated by SEBI.
There are three categories of AIFs. Category I AIFs invest in start-ups or early-stage ventures considered as socially or economically desirable by the government or regulators. Category II AIFs do not fall in Category I and III and do not undertake leverage or borrowing except to meet daily operational requirements and as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012. Category III AIFs use diverse or complex trading strategies and may employ leverage, including through investment in listed or unlisted derivatives.
