The Reserve Bank of India (RBI) on Monday allowed real estate developers and housing finance companies to raise up to $1 billion through external commercial borrowing (ECB) this financial year to promote low-cost housing projects.
The funds raised could be used either for developing low-cost housing projects or providing loans up to Rs 25 lakh to individuals for buying units with a price tag of Rs 30 lakh or less. “It has been decided to allow ECB for low-cost affordable housing projects as a permissible end-use, under the approval route. ECB can be availed of by developers/builders,” RBI said in a circular.
Besides developers, the central bank said housing finance companies/National Housing Bank can also raise ECB for financing prospective owners of low cost, affordable housing units.
Slum rehabilitation projects, the circular said will also be eligible for raising ECB.
ECB is considered attractive as cost of raising the loan abroad is lower than that of domestic borrowings.
Besides, they provide an additional avenue to access large amounts of funds from global financial markets.
According to the guidelines, developers/builders with a minimum track record of five years in undertaking residential project will be eligible to raise ECBs.
With regard to HFCs, the circular said only those companies with a minimum paid up capital of Rs 50 crore and minimum net-owned fund of Rs 300 crore would be eligible to raise ECBs.