RBI has allowed companies to raise up to $1 bn but hedging of costs could make this unattractive for borrowers

Though the Reserve Bank of India has allowed real estate developers and housing finance companies to raise up to $1 billion (Rs 5,400 crore) via external commercial borrowing (ECB), hedging of costs could make this unattractive for borrowers. "It looks very difficult to raise funds through this new window. Monitoring use of funds is going to be a challenge. Also, there is a question mark over preparation and ability for managing currency risks even through hedging," said S Srinivasaraghavan, head, treasury, Dhanlaxmi Bank.

The government is considering a proposal to allow debt restructuring for real estate projects that face delays due to sovereign clearances. It is also considering creating a sub-category of commercial real estate-housing to allow an extended repayment period to developers.

As per the current policy, any loan given to developers for non-infrastructure sectors turns into a non-performing asset (NPA) when the project gets delayed by more than six months after the date of commencement of commercial operations (DCCO) without any payment made to the lenders. The DCCO dates means the time when the developer actually commences construction after getting the necessary approvals. After this period, banks usually declare the loan as an NPA if repayments are not made for a period of 90 days.

New Delhi The special extra-commercial borrowings (ECB) window for low-cost housing projects will be subject to a cap of $1 billion to start with. The detailed norms for ECB access to this segment, which is facing a funds crunch, are likely to be announced soon, say government sources.

In August, the government had allowed designated housing finance companies and the National Housing Bank (NHB) to access overseas loans for the specific purpose of financing low-cost housing. ECB would be permitted in housing projects where 60% of the total area is devoted to low-cost houses having a carpet area of 60 sq metres, sources said.

New Delhi Attributing the housing boom to easy availability of loans, new housing and urban poverty alleviation minister Ajay Maken on Wednesday said that the housing bubble could burst in the absence of proper planning.

As per the latest figure, he said, the number of vacant houses in the country were rapidly rising and already accounted for 11% of the total housing units in developed areas where middle and upper middle class people live. This is like a bubble which can burst any time.

Housing finance options for low-salary earners and the self-employed poor in India are severely limited and have significantly affected their housing conditions. A recent session of the governing council of UN-HABITAT focussed on this theme and emphasised the need to expand financing options.

A. Srivathsan A drastic intervention that combines incentives, subsidies and regulation is required to address the housing crisis.