Economy

ECB norms for affordable housing to be issued soon

Shishir Sinha Bindu D. Menon New Delhi | Updated on March 12, 2018 Published on June 27, 2012

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The real-estate sector may soon get a boost as the Reserve Bank of India is likely to issue shortly the final guidelines for External Commercial Borrowing (ECB) for low-cost, affordable housing.

In Budget 2012, the Finance Minister, in view of the shortage of housing for low income groups in major cities and towns, proposed to allow ECB for low cost affordable housing projects. The real estate sector, in general, is not permitted to go in for ECBs.

A senior Government official said that the Finance Ministry had raised the issue with the Ministry of Housing and Urban Poverty Alleviation (HUPA) regarding ECB for low cost affordable housing and received a response.

A Finance Ministry official added that final guidelines related to the means of raising funds, the channels to be used and other conditions are expected to be out soon.

Mixed bag

It is likely that ECB will be routed through the National Housing Bank (NHB), which will ensure the end use. Channelising through NHB will help less known developers to benefit from foreign funds, the official added.

Meanwhile, the real estate sector has mixed views on the move.

“We see this as a good opportunity. Real estate players can have greater access to market credit,” said Mr Navin Raheja, Chairman, NAREDCO, and CMD Raheja Developers.

According to Mr Gaurav Pandey, SVP & Head – Research at PropEquity, said, “Liberalising ECBs in low cost housing is a much-needed initiative and would provide an avenue for developers to source funds at significantly lower costs and pass the benefits to end buyers. However, this would only address part of the larger problem that developers are facing in managing and raising funds.”

But many developers are sceptical.

Mr Sanjeev Srivastva, Managing Director, Assotech Realty Ltd, notes that, “The cost of funds will not be cheap because of the international economic situation. In fact, we had proposed that either National Housing Bank or housing finance companies should bear the cost of hedging the dollar.”

ECB will be one among various measures to boost affordable housing. The Government is already considering raising the cost ceiling for subsidy (capital assistance) under affordable housing. This includes raising the loan ceiling for subsidy to Rs 5 lakh from Rs 1 lakh for EWS dwelling units and increasing the capital assistance to the developers under the Affordable Housing in Partnership Schemes to Rs 80,000 from Rs 50,000 per dwelling unit. A Technical Group constituted by the Ministry of Housing and Urban Poverty Alleviation has estimated urban housing shortage at the beginning of 11th Plan (2007-08) as 24.71 million households in 2007 which is projected to increase to 26.53 million by the end of 11th Five Year-Plan (2011-12).

>Shishir.s@thehindu.co.in

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Published on June 27, 2012
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