Easier ECB norms to create more affordable housing

01 Jul 2013 Editorial Team

Rating agency Crisil has said that the easing of fund-raising norms through the external commercial borrowing (ECB) route will lead to developers focusing on low-cost housing projects. Earlier this week, RBI lowered the total experience of developers or builders for affordable housing projects to 3 years, against 5 years prescribed earlier to avail of ECBs.

The RBI has also withdrawn the condition of minimum paid-up capital requirement of not less than Rs 50 crore for housing finance companies (HFCs) to avail of ECBs. Both, housing finance companies and developers, are the direct beneficiaries while home buyers will also benefit in terms of concessional interest rates and greater availability of low-cost homes, Crisil said in a report.

Crisil estimates that the cost of funding for developers will come down to around 9-11 per cent (taking into account the hedging cost) from the current levels of 15-20 per cent, depending on the current source of funds. In addition to the cost of funds, since the criteria of past experience has been relaxed, relatively less experienced developers will also benefit as it will enable them to launch new projects in the affordable housing segment," it said.

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