12/4/2014

ECBForLowCostAffordableHousingSchemeRealEstateandConstructionIndia

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India:ECBForLowCostAffordableHousingScheme
LastUpdated:31January2013
Singh&Associates

TheFinanceMinisterofIndiawhilepresentingtheUnionBudgetfortheyear201213hadproposedtoallowExternal
CommercialBorrowings("ECBs")forlowcostaffordablehousingprojects.InviewoftheannouncementmadeintheUnion
BudgetTheReserveBankofIndiaissuedCircularonExternalCommercialBorrowingsECBforLowCostAffordableHousing
SchemevideA.P.(DIRSeries)CircularNo.61dated17thDecember,2012whichallowedECBofUSD1(One)billionforthe
FinancialYear20122013.

THEDETAILEDGUIDELINESONECBSETOUTINTHECIRCULARFORLOWCOSTAFFORDABLE
HOUSINGSCHEMEWEREASFOLLOWS
DEFINITIONOFELIGIBLEPROJECT
AlowcostaffordablehousingprojectforthepurposeofECBwouldbeaprojectinwhichatleast60percentofthepermissible
FSIwouldbeforunitshavingmaximumcarpetareaupto60squaremeters.
Slumrehabilitationprojectswillalsobeeligibleunderthelowcostaffordablehousingscheme.Theeligibilityofslum
rehabilitationprojectforECBwillbebasedontheparameterstobesetbytheCentralSanctioningandMonitoringCommittee
oftheAffordableHousinginPartnershipScheme(AHP)constitutedundertheChairmanshipofSecretary,Housing&Urban
PovertyAlleviation(HUPA)whichadministerstheslumrehabilitationprojects.

ELIGIBLEBORROWERS:
(a)Developers/builders:
Developers/builderswithprovenfinancialtrackrecordbasedonthefollowingcriteriashallqualifyforavailingECBforlowcost
affordablehousingprojects:
i)Developers/buildersundertakinglowcostaffordablehousingprojectsshouldbeacompanyregisteredundertheCompanies
Act,1956
ii)Suchdevelopers/buildersshouldhaveminimum5years'experienceinundertakingresidentialprojects,andshouldhave
goodtrackrecordintermsofqualityanddelivery
iii)Thedevelopers/buildersshouldnothavedefaultedinanyoftheirfinancialcommitmentstobanks/financialinstitutionsor
anyotheragenciesiv)Theprojectshouldnotbeamatteroflitigation
v)Theprojectshouldbeinconformitywiththeprovisionsofmasterplan/developmentplanofthearea.Thelayoutshould
conformtothelandusestipulatedbythetownandcountryplanningdepartmentforhousingprojectsand
vi)AllnecessaryclearancesfromvariousbodiesincludingRevenueDepartmentwithrespecttolandusage/environment
clearance,etc.,areavailableonrecord.

(b)HousingFinanceCompanies(HFCs):
HFCs,satisfyingthefollowingconditions,canavailofECBforfinancingprospectiveownersoflowcostaffordablehousing
units:
i)TheHFCshouldberegisteredwiththeNationalHousingBank(NHB)andoperatinginaccordancewiththeregulatory
directionsandguidelinesissuedbyNHB
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ECBForLowCostAffordableHousingSchemeRealEstateandConstructionIndia

ii)Theminimumpaidupcapital,asperthelatestauditedbalancesheet,shallnotbelessthanINR50crore
iii)TheminimumNetOwnedFunds(NOF)forthepastthreefinancialyearsshallnotbelessthanINR300crore
iv)BorrowingthroughtheECBshouldbewithintheHFC'soverallborrowinglimitof16timestheirNetOwnedFunds(NOF)
v)Thenetnonperformingassets(NNPA)shallnotexceed2.5%ofthenetadvances
vi)ThemaximumloanamountsanctionedtotheindividualbuyerwillbecappedatINR25lakhsubjecttotheconditionthatthe
costoftheindividualhousingunitshallnotexceedINR30lakhand
vii)TheECBshallbeswappedintoRupeesfortheentirematurityonfullyhedgedbasis.
BesidesHFCsmeetingnormssetatparaabove,NHBshallbeeligibleforraisingofECBforfinancinglowcostaffordable
housingunitsofindividualborrowers.Further,intheeventadeveloperoflowcostaffordablehousingprojectnotbeingableto
raiseECBdirectlyasenvisagedabove,NationalHousingBankshallbepermittedtoavailofECBforonlendingtosuch
developerswhosatisfytheconditionsstatedinpara3(II)(a)abovesubjecttotheinterestratespreadsetbyRBI.
ECBproceedsshallbeutilizedonlyforlowcostaffordablehousingprojectsandshallnotbeutilizedforacquisitionofland.

NODALAGENCYFORDECIDINGPROJECT'SELIGIBILITYFORLOWCOSTAFFORDABLEHOUSING
Builders/developersmeetingtheeligibilitycriteriashallhavetoapplytotheNationalHousingBank(NHB)intheprescribed
format.NHBshallactasthenodalagencyfordecidingaproject'seligibilityasalowcostaffordablehousingproject,andon
beingsatisfied,forwardtheapplicationtotheReserveBankforconsiderationundertheapprovalroute.OnceNHBdecidesto
forwardanapplicationforconsiderationofRBI,theprospectiveborrower(builder/developer)willbeadvisedbytheNHBto
approachRBIforavailingECBthroughhisAuthorisedDealerintheprescribedformat.Guidelineswithrespecttotheformatof
application,projectmonitoring,etc.arebeingseparatelyissuedbyNHB.

FURTHER,UNDERTHESAIDCIRCULAR,ITHASALSOBEENPROVIDEDTHAT
Developers/builders/HFCs/NHBarenotpermittedtoraisethroughForeignCurrencyConvertibleBonds(FCCBs)under
thescheme
Anaggregatelimit(subjecttoannualreview)ofUSD1(one)billionisfixedforECBunderthelowcostaffordablehousing
schemeforthefinancialyear201213.ThisincludesECBstoberaisedbydevelopers/buildersandNHB/specifiedHFCs.
AllotherECBparameters,suchas,recognizedlender,minimumaveragematurityperiod,allincostceilings,restrictions
onissuanceofguarantee,choiceofsecurity,parkingofECBproceeds,prepayment,refinancingofECB,reporting
requirementsremainunchangedandshallbecompliedwith.
Theamendedpolicywillcomeintoforcewithimmediateeffectandtheschemewillbereviewedafteraperiodofoneyear
basedontheexperiencegainedintheimplementationofthescheme.
Thecontentofthisarticleisintendedtoprovideageneralguidetothesubjectmatter.Specialistadviceshouldbesoughtabout
yourspecificcircumstances.
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