SWAMIH Fund supports a Mid-income housing project in India

According to a top executive of the fund, the government-backed and SBI CAP Ventures-managed last-mile financing platform Special Window for Completion of Construction of Affordable and Mid-Income Housing Projects (SWAMIH) has helped complete stalled housing projects across the country, unlocking liquidity worth more than Rs 350 billion.

The Rs 15,530-crore fund supported by the Ministry of Finance has so far granted final approval to 130 projects with sanctions of Rs 125 billion. For the next three years, it plans to complete about 81,000 homes in 130 projects across 30 tier 1 and 2 cities, with 20,557 homes already completed.

“In addition to helping homebuyers by completion of stalled projects, SWAMIH fund’s support has resulted in kick-starting the ecosystem around these projects. A steady revival in construction, sales cycle and liquidity has helped many banks and financial institutions get debt repayments. We can certainly see a multiplier effect of 2.5 to 3 times at play across all ancillary industries,” said Irfan A. Kazi, chief investment officer, SWAMIH Investment Fund.

The government recently stated that it would increase its total investment in the fund by Rs 50 billion, bringing it close to Rs 155.3 billion. With the extra effort, the fund can continue to review agreements until December 2024. "The fund emphasizes business continuity, even in problem projects that deal with various legal issues on their project or the promoters. In each investment, we have included a business continuity plan to ensure the completion of the project, even if the developer or promoters are unavailable due to legal action," Kazi said.

Nirmala Sitharaman, the Minister of Finance, declared SWAMIH as a Category II alternative investment fund (AIF) in September 2019. In November 2019, the cabinet approved it. At its first close in December 2019, the fund obtained a commitment of Rs 100.37 billion, with the Indian government promising a cash injection of up to Rs 50 billion.

"We are not involved in relationship financing, we do with project financing. Robust oversight and control over project spending is the mainstay of the process, allowing for faster project completions," Kazi said, adding that the fund itself only makes payments to suppliers and contractors at actual amounts incurred.

The fund has quickly gained public trust within three years of its inception, as large-scale stressed projects have been completed with the intervention of SWAMIH. The fund's presence in a project often acts as a catalyst for better collections and sales, even in projects that have been delayed for years.

"The fund looks at the financing of all projects that meet the basic criteria, despite problems related to supply and demand in the micromarket, the promoter's track record and legal issues. The underlying principle in the investment mandate is that the homebuyers should not suffer for the sins committed by the developer," he said.

Refunds from SWAMIH are set up on a "pay when able" basis and are often not made until the building is finished. It imposes no additional annual, service or processing fees and charges all funded projects a normal internal return of 12%. Life Insurance Corporation of India and State Bank of India are both anchor investors in the fund (LIC). One of the main investors is the mortgage lender HDFC, along with a few nationalized banks.

This fund is an important part of the steps the government is taking to inject funding into ailing projects so that apartment owners across the country can receive their unfinished homes.