State PCS

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Alternate Investment Fund

The Union Cabinet has approved the creation of an Alternative Investment Fund (AIF) of Rs. 25,000 crore to provide last-mile funding....

Context: The Union Cabinet has approved the creation of an Alternative Investment Fund (AIF) of Rs. 25,000 crore to provide last-mile funding for stalled affordable and middle-income housing projects across the country.

  • Alternate Investment Fund refers to any privately pooled investment fund, (whether from Indian or foreign sources), in the form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP).
  • They include angel funds, commodities, real estate, venture capital, private equity, etc.
  • It is regulated by the SEBI.
What are the categories of AIFs?
  • Category I: Mainly invests in start- ups, SME’s or any other sector which Govt. considers economically and socially viable.
  • Category IIPrivate equity funds or debt funds for which no specific incentives or concessions are given by the government or any other Regulator.
  • Category IIIHedge funds or funds which trade with a view to make short term returns or such other funds which are open ended and for which no specific incentives or concessions are given by the government.
Hedge fund
What are the Key features?
  1. The fund size will initially be Rs. 25,000 crore with the government providing Rs. 10,000 crore and the State Bank of India and the Life Insurance Corporation providing the balance.
  2. The funds will be set up as Category-II Alternative Investment Fund registered with the Securities and Exchange Board of India and will be managed by SBICAP Ventures Limited.
  3. The open-ended fund is expected to swell over time. The government is also in talks with sovereign bonds and pension funds to put in money in AIF further.
  4. The Cabinet also approved the establishment of a ‘Special Window’ to provide priority debt financing for completion of stalled housing projects in the affordable and middle-income housing sector.
What are the Expected Benefits?
  • There are more than 1,600 housing projects which are stalled. The fund is expected to revive the same.
    • This will help in alleviating stress for homebuyers, real estate players as well as banks that have backed these projects.
  • Impact on Other Sectors
    • Revival of the real estate sector will also lead to demand of cement, iron & steel industries, thus also generating employment.
  • The fund will also generate commercial return for its investors.
    • The AIF is expected to pool investments from government-related and private investors, including public financial institutions, sovereign wealth funds, public and private banks, etc.

Also Read: National Infrastructure Pipeline

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