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Centre to treat debt raised from Alternate Investment Fund as interim finance

Sweetened offer for investors looking to invest

Central government, Alternate Investment Fund, Last-mile funding, Stalled realty projects, Securities and Exchange Board of India, AIF Special Window for Affordable and Middle Income Housing Investment Fund, Insolvency and Bankruptcy Code, NCLT, State Bank of India, Life Insurance Corporation of India

The Central government has sweetened offer for investors looking to invest in the Rs 25,000 crore worth Alternate Investment Fund (AIF) announced in 2019 to support last-mile funding for stalled realty projects in the middle income and affordable housing segments.

The Centre has now specified that a debt raised from the Securities and Exchange Board of India (SEBI)-registered AIF Special Window for Affordable and Middle Income Housing Investment Fund-I will be treated as ‘interim finance’ under the Insolvency and Bankruptcy Code (IBC).

The move is expected to pave the way for monies from the fund to smoothly flow into stalled realty projects that are before NCLT and facing IBC proceedings. This is because once a debt raised from the fund is considered as interim finance, it will get highest precedence over any due of any other creditors under the waterfall mechanism spelt out under IBC.

The Special Window for funding stalled affordable and middle income housing projects had been announced in 2019 to provide much-needed liquidity through a government-sponsored fund. The funding will be for projects that meet eligibility criteria and amounts up to Rs 400 crore per project.

While the Central government has committed Rs 10,000 crore to the fund, banks and other eligible investors can also participate, given that the Fund’s corpus can go up to Rs 25,000 crore.

The Centre had announced plans to bring in the State Bank of India (SBI) and the Life Insurance Corporation of India (LIC) as investors into the Fund and was also open to getting sovereign wealth funds as investors on board for this fund.

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