The Fund can provide capital for construction and completion of net worth positive projects only. A project can be considered net worth positive only if the value of sold receivables plus unsold inventory is greater than cost to complete the project and to service the investment by the Fund. In some cases, a project would be net worth negative if the Fund has to factor in all potential penalties such as interest / compensation / refunds payable to home buyers along-with the balance project cost that is required to be funded to complete the project. The project will then not meet the funding eligibility criteria for the Fund.
Hence, in most of the SWAMIH funded projects, we stipulate a condition in our transaction documents that all such potential penalties / compensation will not be considered as part of project costs and will be funded by the developer from its own sources. However, in select cases, given the past history of the project and likelihood of such risks, the Fund is also requesting that the developer obtains a confirmation from the home buyers to agree to a new extended possession date in agreement with home-buyers and also revised RERA completion date. This will have the effect of a reduction in the potential liabilities to make the project net worth positive and enable the project to meet the funding eligibility criteria. Then the Fund can provide the capital to be used to complete such projects.
This is done in the larger interest of the home-buyers awaiting delivery of stressed projects while still ensuring that the project is a viable investment for the Fund.