Friday, December 6, 2019

Ministry of Finance (MOF) or SBI authority plan priority positions for real estate under AIF


To strengthen stalled housing projects, SBI and Ministry of Finance plan priority positions for real estate AIF


Government, SBI and LIC contribute Rs 25,000 crore for Alternative Investment Fund to fund the delay in real estate projects. After the completion of the phase, an alternate fund of Rs 25,000 crore to provide funds for the delayed housing projects in phases.

Real estate projects which are in NPA or NCLT can also be funded by an alternative real estate fund of Rs 25,000 crore.

AIF to allow priority loan financing to complete delayed housing projects.


The State Bank of India (SBI) and the Ministry of Finance (MoF) are exploring a legal framework, where the assets of companies receiving funds with suggested Alternative Investment Funds (AIFs) to strengthen delayed housing projects and The first charge will be on cash flow.

It will finance 1,600 delayed housing projects carrying 4,58,000 housing units across the country. This step is to create employment opportunities as well as improve the demand for cement, iron and steel industries.

The government will put Rs 10,000 crore into this Alternative Investment
Fund(AIF) while SBI and LIC will provide Rs 15,000 crore, taking the total size to Rs 25,000 crore.

It aims to relieve stress in key sectors of the economy. The size of the fund will increase as sovereign and pension funds are expected to participate in this AIF. AIF can also be used by projects that are declared non-performing assets or facing insolvency proceedings.

Changes may be made to the Insolvency and Bankruptcy Code, 2016 (IBC) to incorporate the lenders' seniority concept, which is not currently adequately recognized in the Insolvency and Bankruptcy Code (IBC) in its current form. According to sources, the Ministry of Finance (MoF) has referred the matter to the Law Ministry.

SBI, the country's largest lender and its arm, has been instrumental in arranging the SBI Capital Market Fund, and is approaching other banks and financial institutions to participate in AIFs - private joint ventures like venture capital, private equity Regulatory languages ​​and real estate funding for agencies.

By law, a bank may invest up to 10% of the Alternative Investment Fund(AIF) fund.


Therefore, the SBI is maximum Rs. Will be able to invest in 2,500 crore in the fund and asked other institutions to join the suggested Rs. 25,000 crore fund comprising the government Rs. 10,000 crores Rs. Addressing the AIF as a senior status among lenders may make it easier and easier for other banks to invest in it.

Under the scheme, the fund will come back when lending to a company that its seniority should be part of the inter-creditor agreement. If the company fails to recover and is subsequently declared insolvent. In this situation, the COC will have to identify the most senior charge among all lenders. If the company is already facing bankruptcy under the IBC, the COC will have to address the AIF and keep the seniority of the charge.

Currently, the IBC has made a provision for raising interim finance by the resolution professional after requesting approval from the CoC. 



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