RBI eases ECB norms for low-cost housing projects

Withdraws minimum paid-up capital condition for HFCs

The Reserve Bank of India (RBI) today eased norms to raise funds via external commercial borrowing (ECB) for low-cost affordable housing projects.

Now, developers and builders with three years' experience in undertaking residential projects will be eligible to raise funds through the ECB route. Earlier, RBI had prescribed a minimum five-year experience. They should have a good track record in terms of quality and delivery.

RBI relaxed the minimum paid-up capital norm for housing finance companies (HFCs) to raise funds through ECBs. The condition of minimum paid-up capital of not less than Rs 50 crore for HFCs stands withdrawn. The condition of the minimum net-owned funds of Rs 300 crore for the past three financial years remains unchanged, RBI said.

The annual limit for raising ECB under the low-cost affordable housing scheme is capped at $1 billion.

This norm will be applicable to the current financial year, FY14 and the next year (2014-15). The ECB, availed of by developers and builders shall be swapped with rupees for the entire maturity on a fully-hedged basis.

R V Verma, chairman, National Housing Bank (NHB), said opening of ECB was an important signal to the market. Those raising money through ECB have to keep in mind the volatility in the international financial markets. They should compare the total cost of funds with the domestic cost of funds.

On the issue of fixing spread for on-lending by NHB, RBI said the housing finance regulator would decide the spread taking into account factors like cost. NHB has to ensure the spread for HFCs for on-lending to owners of individual units was reasonable.

HFCs have to furnish a certificate that money raised through ECB is for financing prospective owners of individual units for low-cost affordable housing. They will ensure the cost of individual housing units does not exceed Rs 30 lakh and the loan amount does not exceed Rs 25 lakh.

The maximum carpet area for such units is capped at 60 square metres. They have the responsibility to ensure the interest rate spread charged by the HFCs to the ultimate buyer is reasonable.

NEW NORMS
|Builder should have a experience of three years in residential projects as against five years earlier
|Housing finance firms' criteria of having paid-up capital of Rs 50 crore withdrawn
|Aggregate limit at unchanged $1 billion for 2013-14 and 2014-15