Reserve Bank eases real-estate loan guidelines
George Cherian
MUMBAI, December 28: The Reserve Bank of India (RBI) has relaxed the guidelines for term loans extended by banks to private builders.The central bank has decided that under the scheme of annual housing finance allocation (SAHFA), the period of credit for term loans extended to private builders not covered under the NHB refinance scheme may be decided by banks themselves based on their commercial judgment. In a circular dated December 22, 1997, the central bank has said, "Under the scheme of annual housing-finance allocation, the period of credit for term loans extended by banks to private builders not covered under the National Housing Bank refinance scheme may be decided by banks themselves based on their commercial judgment". It has also decided that bank finance for purchase of a plot alone will form part of housing finance, provided the bank obtains a declaration from the borrower that he intends to construct a house on the plot, whether with the help of bank finance or otherwise, within two years
of availing finance. The central bank has allowed banks to incorporate suitable covenants in the loan document at the time of sanction to enable them to recall the loan or charge a higher rate of interest in the event of non-compliance by the borrower. The Reserve Bank had earlier directed banks to grant term loans to housing-intermediary agencies only against the direct loans sanctioned or proposed to be sanctioned with a limit of Rs 5 lakh per individual in rural and semi-urban areas and Rs 10 lakh in urban and metropolitan areas. Individual loans sanctioned by housing intermediary agencies in excess of these amounts would, therefore, not be eligible for refinance from banks. The central bank, in its directive issued in the first week of December, has also said that term loans extended by banks to housing intermediary agencies against their onlending to non-residents will not be treated as housing finance for the purpose of scheme of yearly allocation of housing finance made to banks. The central
bank has raised the ceiling on housing loans to be extended by banks in rural areas from Rs 3 lakh to Rs 5 lakh per individual for being considered as housing finance under the scheme of yearly housing finance allocation made to banks. For houses constructed in urban and metropolitan areas, RBI had earlier increased the ceiling of Rs 3 lakh to Rs 10 lakh for being considered as housing finance under the scheme of yearly housing finance allocation made to banks. The housing finance shortage by the turn of the century has been estimated to at around 41 million dwelling units. Housing activity has been considered as a powerful agent for the economic growth leading to the development of various industries and employment opportunities in the country. The Ninth Five Year Plan has recognised the need of increasing financial resources for this sector by providing an outlay of Rs 1,50,000 crore for housing. The contribution of the organised sector has been estimated at Rs 52,000 crore. Of this, housing finance
companies are expected to come up with about Rs 15,000 crore.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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