How PRC Backed AIFs Might Solve the Growing Stressed Assets Crisis

By : 360 Realtors

23 December, 2020

By the end of the previous year, the country was suffering from huge piles of incomplete stressed/ stuck assets. It was estimated that more than 450,000 units were either stuck or stressed due to lack of funding. As liquidity flow took a beating, raising further funds was becoming further difficult for developers.

Developers were finding it tough to navigate through the current crisis, which has further aggravated during the COVID crisis.

In a post-COVID world, access to new capital is even more difficult. Besides, the fact can’t be discounted that in case of failure to deliver on time, there are strong legal actions stipulated. The homebuyers who have put in their hard-earned money are also going through a very tough time, as they are not seeing any light in the tunnel. Similarly, given the magnitude of the crisis, the governing and administrative agencies are also concerned. It is estimated that the aggregate total of the stressed assets is roughly equal to 3-4% of the GDP.

A Solution Persists– An Alternate Investment Fund

Despite the  herculean crisis, there is a viable solution for the stressed asset problem. Many such projects are 60-70% complete and would just need a kick-start or last-mile funding, which can be solved by floating an Alternate Investment Fund (AIF). Once those funds are received, construction can begin and inventory can be turned around. With the new money received, the capital can be poured into completing the remaining units, thereby putting things back on track. It will also help in improving the overall cash flow and help in the further development of the remaining stressed units. Thus, the right amount of financial stimulus/kick-start funding can bring the entire house in order.

It’s more than Just Funding- The Crucial Role of a PRC

Raising the kickstart funding to finish the stressed project and move the inventory is more than just raising and managing funds. Although unblocking the right financial package is crucial, to manage the stuck inventory effectively, it is important to closely monitor the construction activities and market and sell the projects. Besides, effective stress management will also be pinned on powerful financial due diligence and research to identify the right products and if required, even do some product repackaging to make it more saleable.

A project revival consultancy can do the activities. PRCs like 360 Rising Straits and 360 XLR8, backed by their proven expertise in the Indian real estate markets and incredible market track record, can offer a prudent solution to the growing challenge of the unsold inventories in the country.

They can conduct the due diligence, identify suitable projects, and raise the funds. However, their role would not just finish here. As a last mile consultant with expertise across the value chain, it can ensure the timely completion of projects alongside selling and marketing of the inventory. Thus, a PRC can ensure the complete turnaround of the inventory thereby placating all the major stakeholders in the system- developer, investor, and end-users.

The developer who is looking for a clean exit can realize the same. As most of such purchases are based on bulk-buying, the investors can make a remarkable profit. However, the biggest beneficiaries are the home buyers, who would eventually get the possession of their home.