External Commercial Borrowings (ECB) for the low cost affordable housing projects is now under permissible end-use under Approval Route
On a review of the policy related to ECB and keeping in view the announcement made in the Union Budget for the Year 2012-13, 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 for low cost affordable housing projects. Housing Finance Companies (HFCs)/National Housing Bank (NHB) can also avail of ECB for financing prospective owners of low cost affordable housing units.
3. Detailed guidelines on ECB for low cost affordable housing
scheme are set out below:-
(I) Definition of eligible project
A low cost affordable housing project for the purpose of ECB
would be a project in which at least 60 per cent of the permissible FSI would be
for units having maximum carpet area up to 60 square
meters.
Slum rehabilitation projects will also be eligible under the
low cost affordable housing scheme. The eligibility of slum rehabilitation
project for ECB will be based on the parameters to 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) which administers the slum rehabilitation
projects.
(II) Eligible Borrowers :-
(a) Developers/builders:-
Developers/builders with proven financial track record based on
the following criteria shall qualify for availing ECB for low cost affordable
housing projects:
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 5 years’
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.
(b) Housing Finance Companies (HFCs):-
HFCs, satisfying the following conditions, can avail of ECB for
financing prospective owners of low cost affordable housing units: -
i) The HFC should be registered with the National Housing Bank
(NHB) and operating in accordance with the regulatory directions and guidelines
issued by NHB;
ii) The minimum paid-up capital, as per the latest audited
balance sheet, shall not be less than INR 50 crore;
iii) The minimum Net Owned Funds (NOF) for the past three
financial years shall not be less than INR 300 crore;
iv) Borrowing through the ECB should be within the HFC's
overall borrowing limit of 16 times their Net Owned Funds (NOF);
v) The net non-performing assets (NNPA) shall not exceed 2.5 %
of the net advances;
vi) The maximum loan amount sanctioned to the individual buyer
will be capped at INR 25 lakh subject to the condition that the cost of the
individual housing unit shall not exceed INR 30 lakh; and
vii) The ECB shall be swapped into Rupees for the entire
maturity on fully hedged basis.
Besides HFCs meeting norms set at para above, NHB shall be
eligible for raising of ECB for financing low cost affordable housing units of
individual borrowers. Further, in the event a developer of low cost affordable
housing project not being able to raise ECB directly as envisaged above,
National Housing Bank shall be permitted to avail of ECB for on-lending to such
developers who satisfy the conditions stated in para3 (II) (a) above subject to
the interest rate spread set by RBI.
(III) End –use:
ECB proceeds shall be utilized only for low cost affordable
housing projects and shall not be utilized for acquisition of land.
(IV) Nodal agency for deciding project’s eligibility for low cost
affordable housing
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. Guidelines with respect
to the format of application, project monitoring, etc. are being separately
issued by NHB.
4. Developers/builders/HFCs/ NHB will not be permitted to raise Foreign Currency Convertible Bonds (FCCBs) under this scheme.
5. For the financial year 2012-13, an aggregate limit of USD
1(one) billion is fixed for ECB under the low cost affordable housing scheme
which includes ECBs to be raised by developers/builders and NHB/specified HFCs.
This limit shall be subject to annual review.
6. All other ECB parameters, such as, recognized lender,
minimum average maturity period, all-in-cost ceilings, restrictions on issuance
of guarantee, choice of security, parking of ECB proceeds, prepayment,
refinancing of ECB, reporting requirements remain unchanged and shall be
complied with.
7. The amended policy will come into force with immediate
effect and the scheme will be reviewed after a period of one year based on the
experience gained in the implementation of the scheme.
8. Reserve Bank of India has since amended the Regulations and notified vide Notification No.FEMA.246/2012 dated November 27, 2012.
Ref- A.P. (DIR Series) Circular No. 61 dated 17 December 2012
