Rural Housing Fund(RHF)

Genesis

The National Urban Housing and Habitat Policy 2007 released by the Government of India in December 2007 commend a multi pronged strategy for achieving the national goal of ‘Affordable Housing to All’. In particular, rural housing is an underserved segment with about only 10% of the housing finance from banks flowing to rural housing. The Golden Jubilee Rural Housing Refinance Scheme introduced by National Housing Bank in 1997 has been successful to some extent and needs to be supplemented.  Keeping this in view an announcement was made in the Union Budget, 2008-09, to provide an amount of Rs. 1200 crores for rural housing. The Hon’ble Union Minister for Finance stated that “Financial inclusion can be taken forward by expanding the reach of NABARD, SIDBI and NHB. Hence, in order to increase the resource base of these three banks, I propose to tap into the resources of scheduled commercial banks to the extent that they fall short of their obligation to lend to the priority sector. Accordingly, it is proposed to create the following funds: a fund of Rs.1200 crore in NHB to enhance its refinance operations in the rural housing sector.”
 

Based on the above, NHB has formulated a Scheme called , Rural Housing Fund (RHF),2008 for lending towards rural housing undertaken by people falling under the weaker section category, as defined in the RBI guidelines on lending to priority sector, given below:

“Weaker section” means and includes:
 (a) Small and marginal farmers with land holding of 5 acres and less, and landless labourers, tenant farmers and share croppers;
(b) Women
 (c) All individuals eligible for loans under SWARNJAYANTI GRAM SWAROZGAR YOJANA (SGSY) and Differential Rate of Interest (DRI) i.e. classified as BPL or marginally above the poverty line.
(d)  Scheduled Castes, Scheduled Tribes &
(e) Persons from minority communities as may be notified by Government of India from time to time. In States, where one of the minority communities notified is, in fact, in majority, item (e) will cover only other notified minorities. These States/Union Territories are Jammu & Kashmir, Punjab, Sikkim, Mizoram, Nagaland and Lakshadweep.

*“Rural area” for the purpose of the scheme is the area comprised in any village including the area comprised in any town, the population of which does not exceed 50,000 (as per the 1991 census).

PLIs(Primary Lending Institutions) are expected to utilize this Refinance Assistance and assist such persons to have a shelter of their own by extending need-based housing loans to them. PLIs are also encouraged to avail of refinance from NHB under its other scheme to enable ‘leverage’ of RHF so that the principal objective of increasing/upgrading housing stock in the rural areas is served. Accordingly, the refinance availment procedures at NHB have been redefined to provide for single point contact, approval and disbursement.

Salient features

1. Purpose

The following direct and indirect loans are eligible for refinance from NHB:

1. Direct Housing loans upto Rs.15 lakhs disbursed by the HFCs to individuals. All new housing constrution along with extension and renovation works would be eligible but refinance for the extension and renovation works would be capped at Rs.5 lakhs per borrower.
2. Housing loan component under Productive Housing in Rural Areas (PHIRA) programme of NHB.
3. Any other assistance provided by the HFCs for implementation of subsidy-cum-self finance schemes of the Government. 
4. All water and sanitation component along with requisite housing infrastructure either as a part of project or independently for up-gradation of existing housing projects.
5. Loans to the weaker sections and provided in rural areas

All housing loans covered/to be covered under refinance should be Standard Assets in terms of statutory guidelines prescribed by RBI/NHB and provided in rural areas and to weaker sections as defined above.

2. Eligible PLIs

1. Housing Finance Companies
2. Regional Rural Banks
3. Microfinance Institutions
4.  State level  Apex  Co-operative Institutions
5. ACHFSs
6. Scheduled Banks
7. Other intermediaries as may be approved by Board and the  Central Government

3. Eligibility Criteria

As per the eligibility norms under the Refinance Schemes of NHB as applicable to as applicable to various classes of the above mentioned PLIs

4. Validity and Minimum size of claim

All loans sanctioned during the past 12 months but yet to be disbursed fully and all loans sanctioned & disbursed after 01.04.2008 would only be eligible for refinance and at the time of making request for refinance.

The minimum size of a refinance claim shall be Rs.100, 00,000/- (Rs. One Crore Only).

5. Security

Applicable to different classes of PLIs as per the applicable Refinance Schemes of NHB.

6. Extent of refinance

Refinance from NHB will be available to the extent of 100 per cent of housing loans sanctioned and disbursed by the PLIs for acquisition / construction of new housing units and for up-gradation / major repairs, in accordance with the provisions of the Scheme.

The refinance assistance under this dispensation would remain valid upto 30th June 2009 or till such further time as decided by NHB.

7. Term of refinance

The refinance under RHF will be repayable within a period not exceeding 7 years with a minimum repayment period of three years. The PLIs will have the option to choose repayment period as per their requirement within the prescribed limit. Repayment of principal and payment of interest will be on quarterly basis. Repayment of principal will start after one clear calendar quarter from the date of release while payment of interest will start from the immediate quarter.

HFCs are free to avail of refinance under other programmes of NHB for rural housing in parallel with RHF to enable leveraging of the funds available under RHF.

8. Rate of interest

The interest rate charged to the PLIs will be a fixed rate with the provision of re-pricing. Rate of interest on refinance is currently at 8% p.a.

9. Revision in interest rate

 NHB will have the option to revise the rates on outstanding loans on completion of 3 years. The revised rate will be effective from the quarter immediately following the quarter in which 3 years get completed. The applicable interest rate will be the then prevailing fixed rate of interest for the term equivalent to the original repayment period of that loan. In the case of upward revision, PLIs will have the option to either continue with the outstanding balance on the revised rates or to prepay the same without any prepayment levy. However, in case of downward revision, if the PLIs so desires, they would be allowed to prepay the amount only on payments of applicable prepayment levy.

10. Application for Refinance Limit

The refinance operations of NHB are centralised at its Corporate Office at New Delhi. PLIs may submit the application for the refinance limit to NHB on format available in the detailed information brochure of RHF.

11. Prepayment

Prepayment shall be considered as per policy in vogue

12. Operational procedure

Same as the Liberalized Refinance Scheme of NHB.