Question: Rejuvenation of real estate sector is vital for bringing back economy on track. Explain role of SWAMIH fund in rejuvenating real estate sector.
Answer: India’s real estate sector was on the brink of collapse after many housing projects were stuck due to lack of finance. Real estate companies became bankrupt and large number of people had their life savings locked in unfinished housing projects.
Problems in real estate sector
- Lack of liquidity
There is no money available with companies to finish their projects. They are unable to liquidify their collateral and ensure continuity of business.
- Loan default
Many real estate companies started to default on the loans due to multiple reasons. The result was the complete collapse of the sector.
- Reduced demand
The demand from customers for homes has started to reduce. As demand reduced, companies are unable to get hold of finances for their projects.
- It is a government-backed fund set up in November 2019 with an estimated fund size of Rs 25,000 crore.
- The fund is managed by SBICap Venture and comes under the government scheme to support stuck housing projects.
Functions of SWAMIH fund
- Invest in cheap housing projects
The fund will be investing in housing projects that are cheap and affordable. In this way it will help the owners t complete the stuck projects.
- Employment generation
The worker density in construction sites is highest in SWAMIH-backed projects. This generates more employment in construction sector.
- Availability of credit
Many bankrupt companies will get money to complete the projects. This will ensure that interests of the company, bank and customer will be upheld.
Thus, the fund has indeed started giving results. It has been able to offer a suitable end to incomplete housing projects in the country.