It is difficult to critique the intent behind the Centre announcing a new Alternative Investment Fund (AIF) with a Rs 10,000-crore sponsor contribution, to provide last-mile funding to stranded real estate projects across India in which homebuyers have been left high and dry by reneging developers. With the Real Estate (Regulation and Development) Act enacted only in 2016 and State governments taking their own sweet time to give effect to it, these buyers have had to fight out protracted legal battles in the NCLT and the courts to seek recompense. But the devil lies in the details of the package.

For one, the package is targeted only at RERA-registered affordable and middle-income category homes that are ‘net worth positive’. Given that the primary problem facing many stuck projects is that their developers have spirited away both the homebuyers’ and lenders’ funds, it isn’t clear how they will be able to demonstrate positive net worth to be eligible. In any case, SBI Caps is likely to have its task cut out in screening the flood of applicants it may receive on this criterion. Two, while projects lined up before the NCLT are eligible, those in the courts are ineligible for the package as the matter is sub judice, ruling out marquee projects. Most important though, is the question of how this AIF will raise supplementary funding from non-government sources that will be essential for it to make a dent to the vast stockpile of stuck projects.

Property consultant Anarock estimates that the sums stuck in the 5.75 lakh uncompleted budget homes across the top seven cities alone is worth Rs 4.64 lakh crore. While the government and pliable domestic institutions such as LIC or public sector banks may be willing to view their contribution to this fund as a bailout, the sovereign wealth funds and institutional investors that the Centre is hoping to rope in, are certain to demand a high Return on Investment commensurate with the risks they’re taking on. That’s a tall ask, given that many of these projects have already been sold to homebuyers who have coughed up (and lost) the bulk of their dues. In the past decade, even professionally managed AIFs in India that carefully curated their projects have ended up with capital losses. It is a moot point how this AIF will convince bona fide investors to participate in this rescue effort.

comment COMMENT NOW