Investors explicate keen interest in last-mile funding for the stuck housing projects.

A sharp contrast to previous years, more investors are eager in last-mile funding for stuck housing projects that seems to be a rub-off impact on equally strained residential projects from the government allocating Rs 25,000 crore.

In the light of evolving regulatory and market circumstances, the burden on developers to deliver the projects at earliest in compliance with the agreed previous possession timeline.

Government estimates suggest that there are 4.58 lakh housing units in 1600 stalled projects that are experiencing delayed delivery, leading to increased consumer activism, a host of litigations in consumer forums and also the NCLT.

Kotak Investment Advisors, Kotak Mahindra’s alternative investment business has focused on distressed projects in the liquidity-hit real estate market and aims to acquire these projects across the nation.

“The last-mile of funding opportunity in the housing sector can be substantial, given there is no allowance for a one-time restructuring of existing loans. The new financer needs to see the current lender becoming subservient and thus no interest and principal payment until payment is made, “Vikas Chimakurthy, CEO, Kotak Investment Advisors’ Realty Fund, said.

Kotak, India’s largest domestic real estate funds, has raised $1.8 billion in total funds and had dry powder of some $500 million or Rs 3,500 crore.  After creating two major investments in stuck projects in the last two years and returning roughly 23% by turning them around, the fund has been calling on to look for opportunities in this field.

“Given the government’s participation, last-mile funding is now one of the lenders’ most popular products across the geographical area. The segment is also characterized by the quicker return of capital with better than reasonable returns, apart from low production, land title and cost of selling risk,” said Subhash Udhwani, the founder of Elysium Capital, the real estate-focused boutique investment bank.

Investors are also interested in these projects as they are already in the final stage and several threats, including price-velocity exploration, regulatory approvals in addition to design and development, have already been mitigated and are therefore come at 12-14 per cent interest cost.

In addition to the RERA-related constraints, last-mile funding is also supported by the recent homebuyer pattern which shows preferences for completed and ready-to-move-in projects to avoid uncertainties. This proves to be a good solution since more assets would benefit all stakeholders. It would also lead to reduced lawsuits as well.