Context-The Union Cabinet has approved the creation of an Alternative Investment Fund (AIF) of Rs. 25,000 crore to provide last-mile funding for stalled affordable and middle-income housing projects across the country.

About fund

• The fund will be set up as a Category-II AIF (Alternate Investment Fund) debt fund registered with SEBI and would be professionally run. For the first AIF, it was proposed to appoint SBICAP Ventures Ltd as the investment manager.

What is the size of the fund?

• The total commitment of funds to be infused by the government in the affordable and middle-income group housing sector through the ‘special window’ would be up to ?10,000 crore. The fund seeks matching contributions from banks, Life Insurance Corporation of India (LIC) and others to generate a total corpus of around ?25,000 crore

Who will manage the fund?

• For the first AIF under the ‘special window’, SBICAP Ventures Limited shall be appointed as the investment manager.

Who will be the investors in the fund?

• AIFs created/funded under the ‘special window’ would solicit investment into the fund from the Government and other private investors including cash-rich financial institutions, sovereign wealth funds, public and private banks, domestic pension and provident funds, global pension funds and other institutional investors.

Will projects under NPA and NCLT be consideed for the last mile funding?

• Yes. Based on the inputs received from the stakeholders, the government has decided to increase the scope of investments to include NPA as well as NCLT projects. All applications for financing would be reviewed by the investment committee of the fund for approval, after due-diligence and discussions with existing lenders and legal advisors.

What will be the criteria for the selection of the projects for funding?

• Funding shall be provided to the projects that meet the following criteria:
• Stalled for lack of adequate funds
• Affordable and middle-income category
• Net worth positive projects (including NPAs and projects undergoing NCLT proceedings)
• RERA registered
• Priority for projects very close to completion.

What is affordable and mid-income housing project?

For the purposes of the first fund under the ‘special window’, affordable or mid-income housing shall be defined to include any housing projects wherein housing units (to be specified in detail in the fund documents) do not exceed 200 sq. m. RERA carpet area and are priced as below:

• Up to or less than INR 2cr in Mumbai Metropolitan Region
• Up to or less than INR 1.5cr in National Capital Region, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad
• Up to or less than INR 1cr in the rest of India.

What is an Alternate Investment Fund ("AIF")?

• Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors. 

In what categories can an applicant seek registration as an AIF?

Applicants can seek registration as an AIF in one of the following categories, and in sub-categories thereof, as may be applicable:

Category I AIF:

• Venture capital funds (Including Angel Funds)
• SME Funds
• Social Venture Funds
•  Infrastructure funds

Category II AIF

Category III AIF

What are Category I AIFs?

• AIFs which invest in start-up or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable and shall include venture capital funds, SME Funds, social venture funds, infrastructure funds and such other Alternative Investment Funds as may be specified.

What are Category II AIFs?

AIFs which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012. Various types of funds such as real estate funds, private equity funds (PE funds), funds for distressed assets, etc. are registered as Category II AIFs.

What are Category III AIFs?

AIFs which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. Various types of funds such as hedge funds, PIPE Funds, etc. are registered as Category III AIFs.