Will the Alternative Investment Fund help revive the realty sector?

Alternative Investment Fund (AIF) is creating succour for the much-needed respite in the realty sector.

In India, Alternative Investment Funds (AIFs) are defined in Regulation 2(1) (b) of Securities and Exchange Board of India Regulations, 2012. In 2014, Market regulator SEBI has allowed seven AIFs to set works in the country under an articulated way then, permitting pooling of funds for the realty sector.

What is the Alternative Investment Fund?

Alternative Investment Fund refers to any privately pooled investment fund, be it in the form of a company or a trust or a body corporate or a Limited Liability Partnership (LLP). Therefore, in India, AIFs do not come under the jurisdiction of any regulatory agency, they are completely private.

Is AIF benefitting the realty sector?

The Finance Minister Nirmala Sitharaman announced an Alternative Investment Fund in September of Rs. 25,000 Cr. to fast accelerate the development of 1,600 stalled residential projects across the nation; however, the fund would only be invested in RERA-registered projects. Of this, the centre would pool Rs. 10,000 crore, and the State Bank of India (SBI) and Life Insurance Corporation (LIC) would add the remaining amount of Rs. 15,000 crore. 

It is now seen that AIF has expanded in both size and scope from the earlier one with clear unit sizes. As per an industry report, AIF will be funding to bail out stalled real estate projects with a unit size of less than ₹2 crores a unit in metros and ₹1 crore in other places. According to Ms. Sitaraman, around 4.8 lakh housing units are stalled for want of funds. Moreover, there are some unsold units throughout the country with one market estimate putting their value at over Rs. 4 Lakh crore. 

Are all states benefitting from AIF?

Many states might remain ambit of AIF, such as West Bengal, Meghalaya, Arunachal Pradesh, Sikkim, Nagaland and Lakshadweep as these states have been registered under the Housing Industry Regulation Act 2017. These states have failed to notify RERA because the builders in these regions are ineligible as per the established standard.

So far, the rest of the States and Union Territories have formed the RERA. Maharashtra has been the first state to notify the Real Estate Regulatory Authority. In fact, the state is at the forefront with a large number of RERA-registered projects, i.e. 21,000. Next suit States are Uttar Pradesh and Gujarat. These states have approx. 2,680 and 5,800 projects registered under RERA, respectively.  

Alternative Investment Fund (AIF), thus, has released most stalled projects by providing unlocking value for a buyer as well as precious cash for project promoters and lenders. However, on the other hand, the return expectations that will come along with the private money in the AIF needs to be managed. The ruling government, through its recent move, along with the RBI with successive rate cuts and liquidity infusion, have created a platform. The realty industry now needs to do its work.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. Propertypistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.