Published On: Tue, Feb 14th, 2017

External Commercial Borrowings available in affordable housing

DrChaturvediBy Dr Sanjay Chaturvedi, LLB, PhD

External Commercial Borrowings are available to affordable housing projects. These ECB are also available for Slum Projects. In the international competitive markets funds are available for as low as 6%. All ECB loan agreements entered into before December 02, 2015 may continue with the disbursement schedules as already provided in the loan agreements without requiring any further consent from the RBI or any AD Category I bank. For raising of ECB under ECB facility for low cost affordable housing projects (low cost affordable housing projects as defined in the extant Foreign Direct Investment policy), the borrowers will, however, have time up to March 31, 2016 to sign the loan agreement and obtain the LRN from the Reserve Bank by this date:

Only Developers/Builders registered as companies may raise ECB for low cost affordable housing projects, qualifying as an eligible borrower, can avail of ECB (not through issue of FCCBs) under the Approval Route.
They should have minimum 3 years’ experience in undertaking residential projects, have good track record in terms of quality and delivery and the project and all necessary clearances from various bodies including Revenue Department with respect to land usage/environment clearance, etc., are available on record.
They should also not have defaulted in any of their financial commitments to banks/ financial institutions or any other agencies and the project should not be a matter of litigation. Builders/ developers meeting the eligibility criteria shall have to apply to the National Housing Bank (NHB) in the prescribed format. NHB shall act as the nodal agency for deciding a project’s eligibility as a low cost affordable housing project, and on being satisfied, forward the application to the Reserve Bank for consideration under the approval route.
Once NHB decides to forward an application for consideration of RBI, the prospective borrower (builder/developer) will be advised by the NHB to approach RBI for availing ECB through his Authorised Dealer in the prescribed format. The ECB availed of by developers and builders shall be swapped into Rupees for the entire maturity on fully hedged basis The ECB to be availed will be subject to an aggregate limit of USD 1(one) billion fixed for ECB under the low cost affordable housing scheme which includes ECBs to be raised by developers/builders and NHB/specified HFCs, for each of the financial year 2013-14, 2014-15 and 2015-16.

If a builder/developer is not able to raise ECB directly as discussed above, National Housing Bank shall be permitted to avail of ECB, under approval route, for on-lending to such developers who satisfy the following eligibility criteria, subject to the interest rate spread set by the Reserve Bank:
i) Developers/builders undertaking low cost affordable housing projects should be a company registered under the Companies Act, 1956;
ii) Such developers/builders should have minimum 3years’ experience in undertaking residential projects, and should have good track record in terms of quality and delivery;
iii) The developers/builders should not have defaulted in any of their financial commitments to banks/ financial institutions or any other agencies;
iv) The project should not be a matter of litigation;
v) The project should be in conformity with the provisions of master plan/ development plan of the area. The layout should conform to the land use stipulated by the town and country planning department for housing projects; and
vi) All necessary clearances from various bodies including Revenue Department with respect to land usage/environment clearance, etc., are available on record.
The ECB to be availed will be subject to an aggregate limit of USD 1(one) billion fixed for ECB under the low cost affordable housing scheme which includes ECBs to be raised by developers/builders and NHB/specified HFCs, for each of the financial year 2013-14, 2014-15 and 2015-16.
The ECB availed of by developers and builders shall be swapped into Rupees for the entire maturity on fully hedged basis.


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