It is time for the real estate sector to make that giant leap towards making solid efforts in meeting the project completion deadlines. E Jayashree Kurup explores the SWAMIH fund prospects in India with a range of experts. Swamih funds not only provided capital to complete stuck projects but also chose to forget the mistakes of the past as selection criteria. The projects are selected for completion only if the project, when complete, has the potential to generate 12% returns to the fund. Besides, it has also created a new format of projects and materials management that may well transform processes on construction sites of the future. When the Rivali Park project in Mumbai’s Borivali finished ahead of time and at a cost less than estimated, Finance Minister Nirmala Sitharaman herself came on a Zoom call to announce the success of this much awaited intervention. The announcement of the Rs 25,000 crore Alternate Investment Fund announced in November 2019 had finally started delivering results.  The Special Window for Completion of Construction of Affordable and Mid-Income Housing Projects (SWAMIH) fund today has managed to get developers, backed with legal documents and balance sheets for scrutiny, queuing up for the fund to complete stuck projects and hand over keys to long-suffering buyers. Swamih has already completed 1,100 homes in five projects. If there is no Covid disruption again this year, it is expected to deliver 10,000 stuck homes in this financial year. With the current run rate, it projects delivery of at least 10,000 more homes every year, for the next 3-4 years. And the good news is that the seed fund of Rs 25,000 crore is not spent yet. It is expected to take 6-7 years to complete with spending linked to completion schedules in large projects. So what has the Swamih Fund done differently from funding in the past? At an Anarock seminar recently, Irfan A Kazi, Chief Investment Officer, Swamih Investment Fund explained the difference. “Swamih is a social impact fund of a scale and size never before seen in the Indian context.” The first difference is that Swamih offers funds to projects which would otherwise not get completion funds at all, or at rates upwards of 20%. Kazi says Swamih offers the funds at a mere 12%. As such it is not a dole but a fund that charges 12% rate of interest but seeks to extract that only after the project is complete and the keys handed over to buyers. Being a fund focussed on construction only, it employs every mean to maximise construction. “We put more labour on the site and today have the highest labour density,” says Kazi. So, what would so much labour be required to do at one time? Since the entire money is available, Kazi says developers are urged to complete the projects simultaneously, and not sequentially. Essentially this means that multiple towers are worked on parallely and even within towers finishing work can begin on lower floors even as the top floors are being cast.  This is possible because there is no pressure on the developer to repay either lenders or even the labour during construction. There is not even pressure of sales or collection during the tenure of construction. But in return, the Swamih fund enforces discipline in ordering materials and paying labour. The developer is not given any money. “The Swamih team’s project managers vet all requirements and pay vendors directly on delivery.” Materials, manpower, speed of construction, quality and adherence to schedules are all enforced. The project management company is on the site. “All bills are submitted by the developer and vetted by the Project management Team who also checks the expenses,” Kazi says. This may change work ethics on construction sites forever, much like the safety codes that have become the norm after Delhi Metro enforced them at its sites. The fund discourages advances and only reimburses. “Disbursements happen only as the cement dries,” explains Kazi. “The only advances they allow are for items like lifts etc where some payments have to be made at the time of placing orders,” says Rohit Khatau, developer of Rivali Park in Borivali, Mumbai. Even if some sales and collections take place during the tenure of construction, that money is spent towards the construction of the project. “Putting money on the table is all you need to do to complete the projects,” Kazi explains. “They are then not dependent on the next financier or customer sales to complete the project.” To have this level of confidence in their ability to complete projects, the Swamih team does an exhaustive technical due diligence before entering a project. Explains Kazi, “There is a very clear cost estimation of how much would be spent on different components of the project.  We keep a track of expenditure incurred versus the cost allocated. We work as pseudo CFOs of the project, not just funding it but ensuring we know how the funding is spent.” With a clear mandate to focus on stuck projects and get them ready for delivery, Swamih is a forward-looking fund. “We do not look at what happened in the past,” explains Kazi. So fewer sales is not a disqualification. Neither is the fact that not a single unit has been sold in the past. Even promoters who have had run-ins with the law are still qualified to apply for this fund. The projects stalled because of problems like this in the past, says Kazi. Legal issues and tussles of the past can be erased if the Swamih team can control inflows and outflows in the future to complete the project and generate 12% return. Being a sovereign backed fund - it is truly national. “Our mandate is to complete projects wherever RERA is applicable,” says Kazi. Today final approval has been given to projects in 36 cities -  8 Tier 1 and 28 Tier 2 cities. Two-stage approval process: A preliminary approval is given on the basis of information available from the developer. A desktop forensic due diligence and then intensive due diligence by 4-5 different companies on various aspects of the project including corporate, legal, forensic, title and ESG determines the final approval. Scoreboard clearance has been given to 87 projects to complete 53,000 homes. Preliminary clearance has been given to 142 projects to complete 78,000 homes. “A lot of information does not stand in the final due diligence,” says Kazi.  Ultimately, it is not a question of Rs 25,000 crore. The government has assured that there will be as much funding as is needed to complete all the projects where there is enough receivables to complete the project and yield 12% return to Swamih funds. The biggest problem area has been existing lenders who had initially been reluctant to step away till the project was completed and the Samih fund exited with 12% returns. But with results to show, this seems a better option than having to write the projects off completely as non-performing assets. E Jayashree Kurup is Director Wordmeister Editorial Services. You can write to her at jkurup@asappmedia.com