RBI to Exempt SWAMIH Fund from Alternate Investment Fund Rules

In a significant move for India’s real estate sector, the Reserve Bank of India (RBI) has decided to exempt the SWAMIH fund from the stringent rules that typically govern alternate investment funds (AIFs). This exemption marks a major regulatory relief for the government-backed real estate rescue fund, allowing it to operate with greater flexibility in supporting stalled housing projects across the country.

The decision is expected to accelerate funding to affordable and mid-income housing projects, reinforcing the government’s ongoing efforts to revive the housing sector and protect the interests of homebuyers.

What Is the SWAMIH Fund?

The SWAMIH fund, or Special Window for Affordable and Mid-Income Housing, was launched in 2019 by the Government of India. Its primary aim is to provide last-mile financing for stressed and stalled housing projects that are viable but lack funding.

The fund is managed by SBICAP Ventures Limited, a subsidiary of the State Bank of India (SBI), and is supported by the Ministry of Finance. It plays a crucial role in reviving projects that are near completion but have been delayed due to financial constraints, offering much-needed relief to both developers and homebuyers awaiting possession of their homes.

Since its inception, the SWAMIH fund has approved funding for hundreds of projects nationwide, directly benefiting thousands of middle-class and affordable homebuyers.

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RBI’s Rules for Alternate Investment Funds

The RBI had earlier introduced tighter norms for alternate investment funds (AIFs) to prevent potential misuse of banking funds and ensure greater transparency. These rules required banks and non-banking financial companies (NBFCs) to make higher provisions on their AIF investments, especially when they were also lenders to the same projects in which those AIFs were investing.

Under the current framework, a single regulated entity can invest up to 10% of an AIF’s corpus, while the combined investment of all lenders cannot exceed 20%. These limits were designed to prevent indirect exposure risks and to curb the practice of evergreening loans—where lenders refinance their stressed assets through investment funds to avoid classifying them as bad loans.

However, these same rules inadvertently constrained the SWAMIH fund, which is structured differently from private AIFs and operates with a public welfare mandate.

Why the RBI Granted an Exemption

Recognizing the unique nature of the SWAMIH fund, the government requested that the RBI exempt it from the AIF restrictions. The Ministry of Finance argued that the fund serves a critical socio-economic purpose completing stalled housing projects, restoring homebuyer confidence, and contributing to the broader housing mission.

The RBI accepted this rationale, acknowledging that the SWAMIH fund is fundamentally different from private investment vehicles. It is not profit-driven; instead, it aims to unlock stuck housing inventory, boost employment in construction, and stabilize the real estate sector.

By granting this exemption, the central bank has provided the fund with the operational freedom it needs to channel debt financing into distressed projects without being constrained by the general AIF framework.

How the Exemption Helps the Real Estate Sector

The exemption is expected to significantly enhance liquidity for developers and speed up the completion of long-delayed housing projects. For thousands of homebuyers, this move could translate into faster delivery timelines and renewed trust in the regulatory system.

The SWAMIH fund focuses on projects in the affordable and mid-income segments — categories that have the highest social impact. By allowing it to function outside the limitations of the AIF rules, the RBI has ensured that the fund’s resources can be deployed more efficiently and at a larger scale.

For developers, especially those struggling with partially completed projects, this decision provides access to structured financing that can help them meet regulatory and delivery obligations.

SBICAP Ventures and Institutional Support

The management of the SWAMIH fund lies with SBICAP Ventures Limited, an SBI subsidiary that has extensive experience in managing infrastructure and real estate investments. The State Bank of India, along with other public financial institutions, is also one of the largest investors in the fund.

Through its professional management and government backing, the SWAMIH fund ensures transparency and accountability. Projects funded under this initiative are closely monitored to ensure that money is used only for construction progress and delivery milestones.

So far, the fund has sanctioned investments for hundreds of projects, unlocking housing for tens of thousands of families across major Indian cities such as Mumbai, Bengaluru, Delhi-NCR, and Pune.

Broader Policy and Housing Impact

The RBI’s exemption for the SWAMIH fund also aligns with the government’s long-term vision of Housing for All. By easing regulatory constraints on a sovereign-backed rescue mechanism, the move demonstrates how targeted financial interventions can complement public policy goals.

The exemption could also pave the way for more such socially focused investment funds to emerge in other critical sectors. It highlights a growing recognition that not all AIFs carry the same risk profile especially those with government oversight and public welfare objectives.

For the housing sector, the decision reinforces confidence among both developers and end-users that the government and the central bank remain committed to resolving the long-standing problem of stalled projects.

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Strengthening the Future of Real Estate Financing

The real estate market has faced numerous challenges over the past decade from liquidity crunches to regulatory bottlenecks. The SWAMIH fund, with its targeted focus and government support, represents a structural solution to one of the sector’s biggest pain points: project completion.

By exempting it from AIF restrictions, the RBI has not only empowered the fund to act faster but also sent a strong signal that socio-economic investment mechanisms will be supported. This confidence boost could encourage other institutional investors to participate in similar development-oriented funds.

As the housing sector stabilizes, timely interventions like this will help restore trust and attract more formal capital into real estate financing.

Conclusion

The RBI’s decision to exempt the SWAMIH fund from alternate investment fund rules is a pragmatic step toward addressing India’s real estate bottlenecks. It balances regulatory prudence with developmental needs, ensuring that genuine, government-backed funds are not hindered by rules designed for private investment vehicles.

By granting this relief, the RBI has empowered the SWAMIH fund to continue its vital mission reviving stalled housing projects, supporting affordable homebuyers, and driving India closer to its goal of accessible housing for all.

In a market that often struggles with liquidity and delayed deliveries, this exemption serves as a timely reminder that well-designed public funds can make a real difference in transforming the landscape of urban housing.