SBICap to be paid 12 percent internal rate of return, but no payment to be made for professional expertise or for monitoring the project
In a relief to thousands of homebuyers, the Supreme Court on September 1 resolved the issue of funding for stuck Amrapali projects, with SBICap Ventures, which manages government-sponsored Special Window for Affordable and Mid-Income Housing (SWAMIH) fund, agreeing to finance six projects with approximately Rs 625 crore.
The SWAMIH Investment Fund has agreed to fund six projects namely, Silicon City 1 and 2, Crystal Homes, Centurian Park Low Rise, O2 Valley and Tropical Garden. The amount would cover a total of 6,973 units.
Harish Salve, senior advocate appearing for SBICap, informed the apex court that the financing by the financial institution is primarily stuck on the issue of internal rate of return (IRR) of 12 percent and the supervision mechanism of the projects to be financed.
The court receiver, R Venkataramani, left the issue of IRR of 12 percent on the court, and stated that NBCC has set up the mechanism to regulate and supervise the projects under the supervision of the court receiver’s committee.
After hearing the parties, the bench of Justice Arun Mishra and UU Lalit directed that SBICap will issue funds to the tune of approximately Rs 625 crore from the SWAMIH Investment Fund for the six projects.
The court also directed the receiver and SBICap to finalise the legal framework for regulating the said funding and submit the same to the court within a period of four weeks.
SBICap will be paid 12 percent IRR, but no payment would be made for professional expertise or monitoring the project which would be the exclusive domain of NBCC and the committee.
The next date of hearing is on September 7. All other issues pertaining to the case would be taken up then.
“Once finance from SWAMIH fund is available, it will generate goodwill among other financial institutions to finance Amrapali projects. Today, the court also directed the receiver to approach the Reserve Bank of India (RBI) and explore the possibility of raising funding from other banks or their consortium. Hopefully, this is a start and other institutions will come forward to fund these stuck projects,” Kumar Mihir, an advocate told.
On August 31, SBICap had said it was not ‘feasible’ to reduce interest rate of 12 percent for Amrapali projects. The SC bench had said the bank should not treat the funding of Amrapali projects as a venture to make profit as 12 percent interest is too high and the fund will get Rs 180 crore over five years as interest. The court had also noted that the rate of interest for housing loan is 8 percent.
The SC on August 25 had directed SBICap to begin funding six projects of the embattled Amrapali Group after SBICap informed the court that it cannot fund all the projects but only six that it found to be viable.
Venkataramani had submitted an application to SBICap to fund stuck Amrapali projects in May.
The detailed Supreme Court order is awaited.