Lenders to Altico Capital are working on a rescue plan for the non-banking financial company (NBFC) that envisages buying ₹1,600 crore of builder loans and adjusting it against future debt repayments, said two people aware of the development.

According to the first person quoted above, these are standard loans on books of Altico and are spread across seven real estate projects. He said the plan is to buy these loans and use 65% of it to cancel Altico’s debt obligations. The remaining 35%, the first person said, will either be pooled into a separate account or paid to Altico in cash.

“Banks are wary about this plan because of the presence of certain unutilized credit limits extended by Altico to these builders and are not too keen to extend those after taking over these loans," said the person quoted above.

The Reserve Bank of India (RBI) perceives commercial real estate exposure by banks as riskier than other loans. It has therefore mandated banks to set aside more money as standard asset provisions between 0.75-1% for these loans. For most other loans, banks have to typically set aside 0.4% of a loan as provisions.

For Altico Capital, among the non-banks affected by the liquidity crisis that began in 2018, approval of such a plan could lead to improvement in its repayment capacity.

Its troubles started when it missed an interest payment to Dubai-based Mashreq Bank on 12 September.

Following the default, rating agency CARE Ratings downgraded Altico Capital. For its resolution, Altico is working with lenders alongside turnaround advisory firm Alvarez and Marsal.

The second person said that while Altico had received term sheets from potential investors for these seven projects last year, lenders wanted the right of first refusal to evaluate these.

“Depending on whether lenders approve the proposal (to buy ₹1,600 crore of loans) Altico would then reach out to these investors. While the earlier term sheets were non-binding, these investors have not indicated any reluctance in revisiting the offers," said the second person.

The troubled real estate lender reported a net loss of ₹368.12 crore during April to September 2019. In the same period of 2018, the company reported a net profit of ₹160.47 crore.

Following the default on interest payments, Altico has received loan recall notices amounting to ₹2,218.13 crore from various lenders, Altico said in November last year. As of 30 September, the company’s outstanding debt stood at ₹4,370 crore.

The second person said that Altico has repaid ₹250 crore to lenders in December and its loan will not be classified as non-performing in Q3 FY20 by banks. However, he added that only one large public sector bank has tagged the company’s loanas NPA owing to a delay in repayment.

The non-bank is currently in the process of a debt resolution plan, looking to monetize its assets to repay the debt. A Bloomberg report on 2 January said that Apollo Global Management LLC and Varde Partners LP are no longer considering bidding for Altico. The firms, Bloomberg said, pulled out because they were unwilling to meet creditor demands to inject as much as ₹2,000 crore of fresh equity into Altico.

A group of homebuyers has moved the Supreme Court challenging the Insolvency and Bankruptcy (Amendment) Ordinance, 2019, that sets a minimum threshold of allottees for homebuyers to be able to initiate insolvency proceedings against a real estate developer, saying that it is against 'fundamental rights guaranteed in the Constitution' and against the objective of the IBC itself.

Homebuyers have said that in the absence of any public data being available, such a threshold is almost impossible to meet.

In December, an ordinance was passed by the government to amend the Insolvency & Bankruptcy Code under which a threshold of 100 buyers or 10 percent of homebuyers is required to take a real estate developer to an insolvency court.

"…Real Estate Allottees who are Financial Creditors under Section 5(8) of the IBC have been rendered remediless and have been subjected to absolute discrimination by putting a precondition/threshold in the form of minimum number of Allottees of a particular project required for filing an application for triggering the code under Section 7 of the IBC, which is not applicable to other financial creditors under IBC," the writ petition filed by 11 homebuyers has said.

"Because the Ordinance runs in complete contradiction to IBC and imposing such a pre-condition on the filing of the application under Section 7 of the IBC is completely against the objective of the IBC, as the pre-condition for any financial creditor to approach the adjudicating authority is quantum of the debt and not the number of financial creditors," it said.

On December 12, 2019, a bill titled 'The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019 (“Second Amendment bill”)' was introduced in the Parliament. As per the changes, homebuyers wanting to take a developer to an insolvency court, will now have to ensure that a minimum of 100 home buyers or 10 percent of the total homebuyers file for bankruptcy against the developer.

The Lok Sabha has referred the Second Amendment bill to a standing committee on the 23 December 2019. The standing committee has three months to submit its report before the Lok Sabha. A feature in the Second Amendment bill is that it seeks to amend Section 7 of the IBC which deals with financial creditors approaching the Insolvency Courts against a corporate debtor. The Second Amendment bill specifically seeks to add a proviso to Section 7 which provides minimum thresholds for initiating insolvency proceedings.

The proviso reads as follows: Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent of the total number of such allottees under the same real estate project, whichever is less."

"The condition imposed on the buyers to file a petition under IBC is highly arbitrary. How can homebuyers be expected to put together this number and then approach the court. There are thousands of cases pending against the builders in NCLTs across the country which in the light of this Ordinance will be automatically dismissed,"said Aditya  Parolia of PSP Legal, who has filed the writ petition on behalf of 11 buyers from across projects.

"The Ordinance is completely against the fundamental rights guaranteed to the Homebuyers (Financial Creditors) under Article 14 and 21 of the Constitution of India. The Union of India has brought in the Ordinance with absolute discrimination by putting a precondition/threshold in the form of minimum number of Allottees of a particular project required for filing an application for triggering the code under Section 7 of the IBC, which is not applicable to other financial creditors under IBC," the writ petition said.

"The ordinance is contrary to the well settled principle as laid down in the Pioneer Urban Land and Infrastructure Limited & Anr. v. Union of India (W.P.(C) No. 43 of 2019 decided on 09.08.2019) and has rendered the said judgment ineffective. Further, the retrospective effect of the Ordinance has made all the petitions infructuous as in absence of any public data being available, such a threshold is almost impossible to meet," it said.

In its judgment dated August 9, 2019 of Pioneer Urban Land and Infrastructure Limited and Ors. Vs. Union of India and Ors. ("Pioneer Judgment"), the Supreme Court upheld the amendments made to the IBC. The Supreme Court observed that legislations such as the IBC and Real Estate (Regulation and Development) Act, 2016 ("RERA") would run concurrent to each other, and in case of a conflict, the IBC would prevail over RERA.

The Delhi police has lodged 13 cases against some builders, for allegedly cheating people by falsely promising them flats under the DDA’s Land Pooling Policy.

The Delhi police, on January 3, 2020, lodged 13 cases against builders, promoters and societies, for cheating home buyers by falsely promising them flats under the DDA’s Land Pooling Policy, a senior police officer said. The Economic Offence Wing (EOW) has registered criminal cases against the builders, who have duped many people seeking housing in Delhi, the police said. They said the builders tried to attract home buyers for investment in lucrative housing schemes in Dwarka and other peripheral areas of Delhi.

During investigation, the police found that the builders lured people through websites promising them houses under the DDA’s land pooling scheme but they did not have the authorisation for it. An SIT has been constituted and further investigation of the cases is in progress, the police added.

The DDA has approved a proposal to undertake in-situ redevelopment and rehabilitation of JJ Clusters in the city on a public-private-partnership mode, officials said.

The Delhi Development Authority (DDA), on January 2, 2020, approved a proposal to undertake viable, in-situ slum redevelopment or rehabilitation, with respect to 17 projects, by executing the work on a public-private-partnership (PPP) mode through open tender, based on DPRs and financial analysis done by consultants appointed for various clusters, the Authority said, in a statement. The decision was taken during a meeting of the urban body chaired by Lt Governor Anil Baijal at Raj Niwas. The rehabilitation is to be done as per the Pradhan Mantri Awas Yojana (PMAY) guidelines, it said.

Among other decisions, the Authority also approved an amendment in the Master Plan for Delhi (MPD) 2021, under which wellness centres in residential areas and mixed-use streets will be allowed to operate on ground floor and basement, from the date of notification. The approved proposals will now be sent to the Ministry of Housing and Urban Affairs for consideration and final notification. The Authority also approved a proposed modification in MPD 2021, under which EWS dwellings units built by developers is to be sold directly to the eligible beneficiaries, identified by the DDA or local bodies as per the DDA policy.

Mindspace Business Parks REIT, backed by Mumbai-based realtor K Raheja Corp and private equity firm Blackstone Group, has filed for an initial public offering (IPO) worth Rs 1,000 crore with markets regulator SEBI.

This is India's second REIT listing after Embassy Parks launched its first REIT in 2019.

Mindspace Business Parks REIT is expecting to raise more than Rs 1,000 crore through the fresh issue of shares and an offer for sale by both K Raheja Corp and Blackstone.

Out of K Raheja Corp's total commercial development, the portfolio carved out for the REIT includes Grade-A office spaces spread across around eight information technology parks in cities including Mumbai Metropolitan Region, Pune, Hyderabad,  and Chennai.

K Raheja Corp is the country's second largest developer of commercial parks and was seen as a prominent candidate for listing REITs in India. The Mumbai-headquartered company has developed commercial space in the western and southern parts of the country under the brands Mindspace and Commerzone.

As per the document, the portfolio of the properties for the Mindspace Business Park REIT is spread across Hyderabad, Mumbai, Pune and Chennai. The total area of completed properties is 19.8 million sq ft and that which is under construction or part of future development is 9.7 million sq ft.

"The launch of Embassy REIT in 2019 opened up a new asset class for investment in country. Its success can be gauged from the fact that between 18 March and 30 November 2019, the price of a single REIT unit reached Rs 445.3 from a launch price of Rs 300, registering a significant 48% improvement. The country is expected to see the launch of at least one more REIT in the coming year," Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa at CBRE had said.

In April last year, Embassy Office Parks, a joint venture between the Bengaluru-based property developer and private equity firm Blackstone, had put 33 million square feet of office and hospitality assets under its proposed REIT comprising of seven business parks and four city-centric buildings spread across Mumbai, Bengaluru, Pune and Noida.

Out of the 33 million sq ft, about 24 million sq ft area was operational at 95 percent occupancy and yielding a rental income of over Rs 2,000 crore annually. Another 3 million sq ft area was under construction and 6 million sq ft area was in the pipeline.

REIT is an investment tool that owns and operates rent-yielding real estate assets. It allows individual investors to make an investment in this platform and earn income. Securities and Exchange Board of India (SEBI) had notified REIT's regulations in 2014, allowing setting up and listing of such trusts, which are popular in some advanced markets.

REITs are listed entities that invest in income-generating properties and distribute at least 90 percent of their income proceeds to unit-holders through dividends. After registration with SEBI, units of REITs will have to be mandatorily listed on exchanges and traded like securities.

Properties listed through a REIT are typically commercial assets -- primarily office spaces that can generate steady and lucrative rental income. Retail malls, hotels, hospitals, schools, student housing, and hotels. Even PSU buildings can be put under REITs.

REITs offer investors who have an appetite as small as Rs 2 lakh an opportunity to invest in the commercial real estate market. Like listed shares, small investors can buy units of REITs from both primary and secondary markets.

Market regulator SEBI had notified REITs norms in September 2014, but they never took off. REITs norms have been modified by five times since then.

According to a  report by JLL India, the country’s commercial real estate market has 294-million-square-feet office space that can be potentially pooled in REITs.

The good governance index is a uniform tool across states to assess the status of governance and impact of various interventions taken up by the state government and union territories.

A good governance index (GGI) was launched on December 25, 2019, by the central government to assess the state of governance in the country, according to a statement issued by the Personnel Ministry.

The objectives of GGI are to provide quantifiable data to compare the state of governance in all states and Union territories, enable them to formulate and implement suitable strategies for improving governance and shift to result-oriented approaches and administration, the statement said. Various principles have been kept in mind while selecting the indicators, i.e. it should be easy to understand and calculate, citizen-centric and result-driven, leading to improved results and applicable to all states and UTs, among others, it said.

“The good governance index is a uniform tool across states to assess the status of governance and impact of various interventions taken up by the state government and union territories,” the statement said.

The GGI takes into consideration 10 sectors — agriculture and allied sectors, commerce and industries, human resource development, public health, public infrastructure and utilities, economic governance, social welfare & development, judicial and public security, environment and citizen-centric governance.

These 10 governance sectors are further measured on a total of 50 indicators. These indicators are given different weightage under one governance sector to calculate the value.

For instance, under agriculture and allied sector, there are six indicators with different weightage such as growth rate of agriculture and allied sector, growth rate of food grains production, growth rate of horticulture produce, growth rate of milk production, growth rate of meat production and crop insurance, the ministry said.

The states and UTs are divided into three groups — big states, north-east and hill states, and Union territories.

The states and UTs are ranked on all indicators separately, at the same time composite ranking is also calculated for these states and UTs under their respective groups based upon these indicators, the statement said.

Minister of State for Personnel Jitendra Singh launched the ‘good governance index’ at an event organised by the Ministry of Personnel, Public Grievances & Pensions on the occasion of good governance day here. The good governance day is observed on the birth anniversary of former prime minister Atal Bihari Vajpayee.

Speaking on the occasion, Singh said the good governance index has been scientifically designed on various parameters of governance. He said that it has been designed keeping in mind the citizen-centricity, which is the prime mantra of the government led by Prime Minister Narendra Modi. Singh said documentation of good governance index is our effort in the direction to carry forward the prime minister’s vision for good governance. The minister also launched smart cards for the Department of Personnel and Training (DoPT) canteen to promote cashless transactions and digitisation.

The 15th edition of the Central Secretariat Manual of Office Procedure (CSMOP) was unveiled by Singh. The main features of CSMOP, which enables the march towards the digital secretariat, are a new chapter on e-office digitization framework that provides guidelines for scanning, entry and storage of data, provision of virtual private network for officers of the rank of deputy secretary and above rank officers and decision-making chapter provides a list of various websites and their links.

The SC has sought a timeline from the centre, on deciding to utilise the newly-launched Rs 25,000-crore stress fund for financing the stalled projects the Amrapali Group.

The Supreme Court, on December 16, 2019, asked the centre to inform it, as to how much time it will take to decide on application for financing the stalled projects of the now defunct Amrapali Group, from the newly-launched Rs 25,000-crore stress fund for the real estate sector. The centre told the top court that a due procedure had to be followed, for securing funds from the stress fund announced by the central government.

A bench of justices Arun Mishra and UU Lalit asked additional solicitor general Vikramjeet Banerjee, whether there was any time limit for disposal of such applications, if made to the fund manager. Banerjee replied that he has no instruction, with regard to the time limit but in case Amrapali needs to secure funds, then it had to make an application in this regard. “We can issue directions to the court receiver appointed for properties of Amrapali but you tell us by Tuesday (December 17, 2019) morning, as how much time is needed to take a final call on the applications,” the bench said.

During the hearing, the top court also expressed annoyance over the manner in which government-owned Metal Scrap Trade Corporation (MSTC) was working, in auctioning the properties of Amrapali Group. It said that the court has to withdraw properties from Debt Recovery Tribunal (DRT), which was earlier entrusted with auctioning of Amrapali properties, as there was cartelisation and proper amount was not fetched even for prime properties. The top court also asked the NBCC to expedite completion of category-A projects of Amrapali, so that they could be sold and the amount could be used for financing other smaller projects.

The Rs 25,000-crore alternative investment fund (AIF), set up to provide last-mile funding for stalled real estate projects by the government, has raised Rs 10,530 crore in its first round and around 400 applications may have already been filed. The first round of disbursement may take place as early as this month itself, sources told Moneycontrol.

Earlier this month, SBICAP Ventures, the investment manager of the fund, announced in a statement that the Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund I attracted interest from investors like State Bank of India (SBI), Life Insurance Corporation of India (LIC), Housing Development Finance Corporation (HDFC) and major public sector banks.

Sanjiv Chadha, Chairman at SBICAP Ventures, said the fund has made remarkable progress since its announcement. “We have substantially completed the fundraising, have scaled up the team, formed the investment committee and have begun examining potential investment opportunities.”

“In the first round, applications of top realty brand names from across the country, wherein the fund requirement is over Rs 100 crore, are likely to be cleared. The first round of approvals may be granted by December 31 itself,” sources said.

On November 6, the government approved the creation of a 'professionally managed' Rs 25,000 crore fund for boosting stalled middle and low-income RERA registered housing projects that are networth positive.

Finance Minister Nirmala Sitharaman said the government will put in Rs 10,000 crore in this alternative investment fund (AIF) while SBI and LIC would provide Rs 15,000 crore, taking the total size of the fund to Rs 25,000 crore.

The Finance Ministry in its FAQs, released later, said the maximum funding will be Rs 400 crore for any single project that will be seeking assistance from the 'special window' or the Alternative Investment Fund (AIF) for completion of the 1,508 projects comprising about 4.58 lakh units.

The AIF can be utilised even by the projects, which have been declared non-performing assets (NPAs) or are facing insolvency proceedings.

The real estate projects that can make the cut include those that require last-mile funding to complete construction, those in the affordable and middle income category, networth positive projects that also include NPAs, those undergoing NCLT proceedings, and RERA-registered projects. Priority will be given to projects that are nearing completion.

Homebuyers are expected to benefit from the funding as it may help revive the stalled projects, leading to early completion and timely possession, especially for buyers paying both EMIs and rent for years. The fund seeks to provide relief to builders who require last-mile funding to complete stuck projects.

Some developers, however, are of the opinion that the fund amount needs to be enhanced soon to ensure that more stalled projects can avail last-mile funding.

“In the first round only big ticket Grade A developers may benefit. More money is required for mid-segment established developers too. The performa of the application form, rules and regulations should be widely circulated to enable more builders to come forward and apply for funding,” a developer said.

Another issue is to do with SBI’s mandate that the proceeds of the fund can be utilised only for construction. They can neither be utilised for repayment of the principal loan of the existing lender nor for servicing interest of the existing lender.

“If the existing lender refuses to provide a No Objection Certificate and allow the fund manager’s debt to take first charge of the project, the existing stalled project will in any case become an NPA within the next three months. The problem here is that even if the fund manager were to take over, the primary lender’s quality of charge will become secondary. This will not work unless RBI allows for one-time restructuring of the loans without NPA classification,” a developer explained.

The Enforcement Directorate has filed a charge-sheet against HDIL’s promoters, in connection with the Punjab and Maharashtra Cooperative (PMC) Bank scam.

The Enforcement Directorate (ED), on December 16, 2019, filed a charge-sheet against Housing Development Infrastructure Ltd (HDIL) promoters Rakesh Wadhawan and Sarang Wadhawan, in connection with the multi-crore Punjab and Maharashtra Cooperative (PMC) Bank scam. The agency submitted its charge-sheet, running into around 7,000 pages, before a special court set up under the Prevention of Money Laundering Act (PMLA).

The Wadhawans have been booked under various provisions of the PMLA. The two were initially arrested by the Mumbai police’s Economic Offences Wing (EOW), which was probing the scam and later taken into custody by the ED, in October 2019.

Just a few days ago, chief economic adviser (CEA) K.V. Subramanian sought to reassure us that the economy was on the mend. But if his predecessor's views are to be believed, that may not be the case. Former CEA Arvind Subramanian, in a working paper co-authored with the former head of the International Monetary Fund's India office Josh Felman, has said that India is passing through a "great slowdown" and seems headed for the "intensive care unit". The economy was suffering a second wave of the so-called Twin Balance Sheet problem, he said, this one marked by bad real estate loans after India’s own housing bubble burst, with knock-on effects on shadow banking that left this sector starved of finance and created a wider crisis in credit markets.

Clearly, lending in some parts of the economy has ground to gasp-inducing lows, though how exactly this crunch could be traced back to demonetization, as the former CEA seems to do, is sure to be contested and put to further academic inquiry. It is also likely that this slowdown is indeed extraordinary, to the extent that shocks may have played a larger role than admitted by analysts given to treating it as a chiefly cyclical phenomenon.

While we examine its causes, what’s critical is that the government has begun to display some urgency in addressing it. Efforts to revive both investment and consumer demand have been made, and a long-held position on fiscal control may end up being sacrificed to impart a significantly large boost. The effects of this over the years are not easy to foresee, and the risks involved need to be weighed carefully, lest the economy gets even harder to rescue should a spending splurge go wrong. What is evident is that for the economy to regain its mojo, action must soon be taken, and it must be consistent with a clear economic vision.