Green signal for credit guarantee fund for urban poor housing

By: P. Sunderarajan

Trust with initial corpus of Rs. 1,200 crore will guarantee loans

The Union Cabinet on Friday gave the green signal for the setting up of a credit risk guarantee fund trust with an initial corpus of Rs. 1,200 crore to help give a push to housing for low-income groups in the country.

The trust will be set up under the Indian Trust Act and the Ministry of Housing and Urban Poverty Alleviation will be its settler. It would be managed and administered by a Board of Trustees with cross-sectoral composition. It would be serviced by the National Housing Bank.

The key principle of the scheme is that the lender shall secure loans to construct and upgrade low-income housing purely on the assets financed, without any other collateral.

The trust will guarantee the housing loans made by the lending institutions to new or existing individual EWS (economically weaker section)/LIG (low income group) borrowers and eligible borrowers forming a group or housing society of at least 20 members.

These loans can be available for a wide range of purposes — home improvement, construction, acquisition, and purchase of new or second-hand dwelling units of size up to 430 sq ft carpet area and involving an amount not exceeding Rs. 5 lakh.

The guarantee cover available under the scheme would be to an extent of 90 per cent of the amount in default, subject to a ceiling of 90 per cent of the sanctioned housing loans up to Rs. 2 lakh and 85 per cent of the amount in default, with a ceiling of 85 per cent for sanctioned housing loans between Rs. 2 lakh to Rs. 5 lakh.

A government spokesperson noted that the scheme assumes importance as urban affordable housing deficit is estimated at about Rs. 26 million and that the total housing loan outstanding was about Rs. 3.06 lakh crore, of which 24 per cent are for loans up to Rs. 5 lakh. Even for these loans, only a part was estimated to be flowing to EWS and LIG sections of society.

The establishment of the fund would facilitate provision of credit to the poor and flow of institutional finance for affordable housing. It is intended to mitigate risk, thereby enhancing the confidence of the lending institutions in lending to the poor.

The lending institutions covered under the scheme would include commercial banks, regional rural banks, housing finance companies, and cooperative housing finance societies.

Initial corpus of Rs. 1,200 crore would be made up of a contribution of Rs. 1,000 crore from the Central government and the balance of Rs. 200 crore from State governments. The fund is part of the Rajiv Awas Yojana scheme for providing housing for the urban poor.

Time extended

The Union Cabinet’s Committee on Infrastructure also met on Friday and approved extension of time by two years up to 2013-14 for completion of projects sanctioned up to March-end under the Jawaharlal Nehru National Urban Renewal Mission.

It also gave its nod for a similar extension for reforms under the Urban Infrastructure and Governance programme and the Urban Infrastructure Development Scheme for Small and Medium Towns under the Mission.



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