The Telegraph
Wednesday , July 16 , 2014
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Prop for affordable housing

Mumbai, July 15: The RBI today gave a boost to affordable housing by allowing banks to raise long-term funds to finance these projects.

Banks lending to this sector will be entitled to various benefits.

“Affordable housing is another segment of the economy which both requires long-term funding and is of critical importance. Accordingly, the Reserve Bank intends to ease the way for banks to raise long-term resources to finance their long-term loans to infrastructure as well as affordable housing,” the RBI said while announcing a relaxation in the reserve requirements of banks.

The apex bank clarified that lending to affordable housing included loans up to Rs 50 lakh to individuals for houses valued up to Rs 65 lakh located in Mumbai, New Delhi, Chennai, Calcutta, Bangalore and Hyderabad.

Besides, it comprises loans of Rs 40 lakh for houses valued up to Rs 50 lakh in other centres.

It also includes housing loans eligible under the priority sector lending. These comprise loans of up to Rs 25 lakh to individuals in metros with a population above 10 lakh and Rs 15 lakh elsewhere.

Loans to any government agency for the construction of dwelling units or for slum clearance and rehabilitation of dwellers subject to a ceiling of Rs 10 lakh per house also fall under this category.

Loans to housing finance companies (HFCs) are also considered priority sector lending. However, funds raised by HFCs should be used for lending for the purpose of buying individual dwelling units, subject to an aggregate loan limit of Rs 10 lakh per borrower.

According to the RBI, the eligibility under priority sector loans to HFCs is restricted to 5 per cent of the individual bank’s total priority lending.