Refinance of construction finance for Affordable Housing

Genesis

The Scheme draws on the National Urban Housing & Habitat Policy 2007 (NUHHP-2007) which has laid stress on measures to respond to the housing needs in the urban areas and the growing pressure on housing and related infrastructure facilities. The Policy seeks to promote various types of public-private partnerships for realizing the goal of “Affordable Housing for All” with special emphasis on the urban poor. The Policy aims at sustainable development of habitat in the country with a view to ensuring equitable supply of land, shelter and services at affordable prices to all sections of society. The ultimate aim is to shift to a demand driven approach through proactive financial sector interventions.

To encourage and support the banking sector’s involvement in this endeavour and as part of its developmental role, NHB intends to lend support to the housing activities aimed at those segments of the society who may afford a moderately priced dwelling unit by way of refinance support. NHB wishes to refinance banks’ financing, low and lower middle income housing, slum housing, industrial worker housing, working women hostels and old age homes, housing projects financed under the JNNURM along with rental housing schemes for migrant labour or any other similar Central Government/State Government scheme including housing affected by natural disaster.

Salient features

1. Purpose

To facilitate availability of affordable homes through construction financing for residential housing .Financing is available for new construction i.e. construction and basic housing related infrastructure as well as for up-gradation /repairs of existing properties.

The following housing projects are eligible for refinance support:

  1. Residential housing projects for EWS/LIG categories.
  2. Slum redevelopment projects.
  3. Rental housing projects for migrant labour in metro and other cities.
  4. Community bulk loans provided by the PLIs. (With tenancy rights ensured by the municipal authorities) i.e. PLIs could also finance Housing projects undertaken by community based financial institutions.
  5. Up-gradations/additions to existing dwelling units along with strengthening and modernization   of the housing infrastructure.
    The carpet area of the dwelling unit to be financed should be upto a maximum of to 700 square feet.

2. Eligible PLIs

Scheduled Banks, RRBs, HFCs, MFIs and other eligible institutions as maybe notified by the GoI.

3. Sanction Parameters

  1. Long Term Debt - Equity ratio of developers should not exceed 2:1 as per the latest annual audited accounts.
  2. Margin from the developer: Min. 20% of project outlay.
  3. Security offered to the PLI shall be mortgage of property and other security that PLI may obtain as collateral.
  4. FACR-Min Asset coverage should be 1.33:1based on market value arrived thru independent third party valuation.

4. Eligible Areas

Urban and Rural Centers including metropolitan cities i.e. Mumbai, Delhi, Kolkata, Chennai, Bengaluru and Hyderabad. Focus will be on Tier II and Tier III cities and slum redevelopment projects in metros.

5. Eligible end users

Public Housing agencies, Private Developers in Housing, Public-Private Partnerships (PPPs), Co-operative Societies, and Employee Housing Organisations like AWHO, CGEWHO, IRWO, and AFNHB.

6. Eligible Amount

Additionally, the maximum selling price of each dwelling unit of the project to be financed not to exceed Rs.15 lakhs with max. inbuilt price escalations of 10%.

7. Extent of Refinance

100%of loan sanctioned by the eligible PLI for Affordable Housing.

8. Period of Refinance

Co-terminus with the PLI’s loan to the Developer/Builder subject to a maximum of 5 years.

9. Repayment

To be fixed on a case to case basis depending on the project size, typically in installments with an initial moratorium of one year. Bullet repayment of refinance may be permitted in exceptional cases.

10. Interest Rate

Fixed/ Floating linked to PLR or a market benchmark. :  Fixed/ Floating linked to PLR or a market benchmark. PLIs have the option to choose floating rate or fixed rate interest. Conversion from fixed rate to floating rate and vice versa is permissible on payment of conversion fee.  Generally Sub-PLR loans will not be extended except to Public agencies/Not for Profit community based organization.

11. Disbursement

Refinance disbursements will be made as per the request for release of refinance. The refinance shall be released on staggered
basis subject to  completion of previous phases. (to be certified)To be fixed on a case to case basis conforming generally to the repayment period stipulated by the PLI to the end borrower depending on the project size, typically in installments with an initial moratorium of one year. Bullet repayment may be permitted in exceptional cases.
 
12. Prepayment

Prepayment shall be considered as per policy in vogue.

13. Other conditions

  1. All the security obtained / to be obtained by the Bank from time to time from its constituents availing financial assistance under the limit in question will be held for and on behalf of NHB and any realisation or recovery from the said constituents under the said limit will be applied as required under section 16B of the National Housing Bank Act, 1987 (No. 53 of 1987).
  2. All statutory clearances/approvals have to be obtained by the PLI in respect of housing loans, before disbursement.
  3. All other rules as per the refinance scheme applicable to Scheduled Banks and HFCs as amended from time to time.
  4. Prior to the sanction of refinance, the borrower (developer, society etc.) should have ownership of the land for the proposed project i.e. finance for land acquisition will not be provided.
  5. The project should be financially viable and should be designed to generate full cost recovery with surplus.
  6. The loan will be released on pro-rata basis in accordance with the physical progress of the project.
  7. The refinance so extended will be part of NHB’s exposure to the PLIs and will not be additional to the exposure limit sanctioned for individual housing loans.
 
   
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