In a significant move to address the challenges faced by homebuyers with investments stuck in delayed housing projects, Finance Minister Nirmala Sitharaman announced the launch of the SWAMIH Fund-2, allocating an additional ₹15,000 crore for the completion of 1 lakh housing units.
The Genesis of SWAMIH
In November 2019, the Indian government introduced the Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund to provide last-mile funding for stalled housing projects across the country. Managed by SBICAP Ventures Ltd, a subsidiary of the State Bank of India, the fund aimed to prioritize debt financing for the completion of stressed, brownfield, and Real Estate Regulatory Authority (RERA)-registered residential projects falling under the affordable and mid-income housing categories.
The necessity of this initiative arose due to the severe liquidity crunch in the Indian real estate sector, which led to numerous incomplete housing projects. Homebuyers were left in a difficult situation, paying both Equated Monthly Instalments (EMIs) on their home loans and rent for their current residences.
Since its inception, SWAMIH Fund-1 has made notable progress. One of the most significant achievements of SWAMIH Fund-1 is the successful completion of 50,000 housing units in stalled projects across the country. The keys to these units have been handed over to homebuyers, offering them long-awaited relief.
The fund has set a target to complete an additional 40,000 units by 2025, further easing the burden on middle-class families who have been caught in the financial strain of delayed projects. The first phase of the SWAMIH Fund raised ₹15,530 crore, which has been utilized to prioritize debt financing for incomplete real estate projects, ensuring that they are completed and handed over to homebuyers.
Unlike traditional financing options, SWAMIH Fund-1 has supported first-time developers, established developers with troubled projects, developers with a poor track record, projects with customer complaints, NPA accounts, and projects involved in legal disputes. This approach has made the fund a lender of last resort, filling critical gaps in financing.
Introduction of SWAMIH Fund-2
Building on the success of the initial fund, Finance Minister Sitharaman announced the establishment of SWAMIH Fund-2 during her budget speech. This new fund is designed as a blended finance facility, with contributions from the government, banks, and private investors. The primary objective is to ensure the swift completion of an additional 1 lakh housing units, providing a much-needed boost to homebuyers and the housing sector.
Key Features of SWAMIH Fund-2
Increased Funding Pool: The second phase of the SWAMIH Fund will inject ₹15,000 crore into stalled housing projects, doubling down on the commitment to resolve the crisis faced by homebuyers. Blended Finance Model: Unlike conventional funding mechanisms, SWAMIH Fund-2 will combine resources from multiple stakeholders, including:
Government allocations to ensure financial stability and credibility. Bank contributions to bring additional liquidity into the market. Private investor participation to enhance scalability and impact. Targeted Project Completion: The fund specifically focuses on stalled projects where significant progress has already been made but require additional financial support for completion.
Priority to Affordable and Mid-Income Housing: Projects under the affordable and mid-income segments will continue to be prioritized, ensuring that homebuyers from the middle class benefit the most from this initiative.
Impact on the Real Estate Sector
The introduction of SWAMIH Fund-2 is expected to have a far-reaching impact on India’s real estate landscape:
A significant portion of India’s urban housing projects have been stalled due to financial distress. The fund will enable developers to resume construction, complete the projects, and hand over units to homebuyers.
It will help unlock stuck inventory, stabilize property prices, and restore confidence among both buyers and investors.
The fund will have a ripple effect on various sectors, including cement, steel, and other construction-related industries, leading to increased demand and job creation. Reviving housing projects can also boost employment opportunities in the real estate and construction sectors, which are among the largest employment generators in the country.
Many homebuyers have faced financial distress due to project delays, forcing them to pay both home loan EMIs and rent. The completion of projects under SWAMIH Fund-2 will significantly reduce their financial burden. By delivering completed homes, the initiative will restore trust in the real estate sector, encouraging further investments and property purchases.
The funding will further reinforce compliance with RERA regulations, ensuring that developers follow timelines and meet quality standards. With SWAMIH focusing on RERA-registered projects, it will act as an incentive for more developers to comply with regulatory norms, improving transparency in the real estate sector.
Challenges under SWAMIH Initiatives
While the SWAMIH initiative has garnered praise, it is not without challenges: Project Eligibility Criteria: To qualify for funding, projects must be RERA-registered, net-worth positive, and at least 30% complete. This means that some distressed projects may still struggle to receive financial aid.
Accountability of Developers: Ensuring that developers utilize the funds appropriately and adhere to strict timelines will be crucial. Regular monitoring and strict penalties for non-compliance may be required to maintain the effectiveness of the fund.
Market Volatility: The real estate market is influenced by economic fluctuations, interest rates, and demand-supply dynamics. While the fund addresses supply-side issues, the demand for housing will also need to remain strong to ensure the success of these projects.
Legal Hurdles and Litigation Risks: Several stalled projects are entangled in legal disputes between homebuyers, developers, and financial institutions. Resolving these issues efficiently will be key to ensuring smooth project completion.
The launch of SWAMIH Fund-2 underscores the government’s unwavering commitment to addressing the challenges in India’s housing sector. By focusing on the completion of stalled projects, this initiative aims to revive the real estate market, stimulate economic growth, and restore confidence among homebuyers and investors.
As the fund progresses, its effectiveness will be closely monitored. If executed efficiently, SWAMIH Fund-2 has the potential to set a new benchmark for real estate financing, ultimately paving the way for a more stable and resilient housing sector in India. Homebuyers who have long awaited the completion of their homes may finally see light at the end of the tunnel, making this initiative a crucial step toward ensuring housing justice for thousands of Indian families.