RBI opens ECB gateway for low-cost affordable housing projects

Nidhi Bothra 21 December 2012

While the Union Budget 2012-13 granted external commercial borrowings (ECB) for low-cost affordable housing projects, the Reserve Bank of India (RBI) has taken a good 10 months to come out with the notification

The RBI, vide its notification dated 17 December 2012, has allowed ECB to eligible developers/builders for low-cost affordable housing projects and housing finance companies (HFCs) and National Housing Bank (NHB) for financing prospective owners of low-cost affordable housing units under the approval route. However, the eligible borrowers will not be permitted to raise foreign currency convertible bonds (FCCBs) under this scheme and cannot use the ECB funds for acquisition of land. All existing norms on ECBs, as may be applicable, shall be applicable here as well.

The NHB shall act as a nodal agency for deciding the project's eligibility as a low-cost affordable housing project. Once satisfied, the application shall be forwarded to the RBI for consideration under the approval route. Currently, a limit of $1 billion has been fixed for ECBs under the low-cost affordable housing scheme and the limit shall be reviewed on an annual basis.

Which projects will be eligible?

1. A project with at least 60% of the perm-issible FSI (floor space index) for units with a maximum carpet area of 60 square meters.

2. Slum rehabilitation projects. The parameters shall be set by the Central Sanctioning and Monitoring Committee of the Affordable Housing in Partnership Scheme (AHP) constituted under the chairmanship of Secretary, Housing & Urban Poverty Alleviation (HUPA).

Who are eligible borrowers?

1. Developers/ Builders-Developers/ builders with minimum five years of experience in undertaking residential projects and proven track record in terms of delivery and quality.

2. Housing Finance Companies (HFCs)-All NHB-registered HFCs satisfying the following requirements:

a. Minimum paid-up capital of not less than Rs50 crore as per the last audited balance sheet;

b. Minimum net owned fund (NOF) of not less than Rs300 crore for the past three financial years;

c. The borrowing through ECB shall be within the overall borrowing limit of 16 times the NOF;

d. Net non-performing assets (NNPA) shall not exceed 2.5% of the net advances;

e. The maximum loan amount sanctioned to the individual buyer will be capped at Rs25 lakh, subject to the condition that the cost of the individual housing unit shall not exceed Rs30 lakh; and

f. The ECB shall be swapped into rupees for the entire maturity on fully-hedged basis.

¹http://rbi.org.in/scripts/NotificationUser.aspx?Id=7757&Mode=0

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