Housing projects to get fresh funding

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P Chidambaram P Chidambaram
Summary* FinMin asks public banks to send list of stalled projects to the National Housing Bank

In a bid to revive residential projects that were stalled due to paucity of funds, the finance ministry has asked all public sector lenders to send a list of all such sites to the National Housing Bank which will finalise fresh lending plans for them.

The revival plan will not only include unfinished housing projects in metros and the National Capital Region but also in Tier II and Tier III cities and those for economically weaker sections.

“Banks are advised to submit a list to NHB of all such semi-constructed projects with their location details together with remarks about non-completion/semi completion, which may be considered viable by the banks for funding and completion of the project,” the department of financial services has written in a recent missive to all public sector lenders.

Separately, NHB chairman RV Verma has also written to all PSB chiefs on the issue asking them to adopt a project and location specific approach to ensure optimum demand for housing units.

The NHB has advocated that banks should first provide financial support to small developers with standalone projects through an escrow mechanism. Further, they should also ensure that payment from individual buyers should be partly used by the builders for paying off their loans.

Pointing out that intervention in stalled projects will prevent cost overruns, Verma has also urged that bank lendings can replace borrowings by builders from informal sector or the NBFCs that charge a much high interest.

“This will result in gradual closure of the project loan through the funds released to the individual buyers against the individual loans,” the NHB has said, adding that progress of such projects should be monitored by the State Level Bankers’ Committee.

Finance minister P Chidambaram has repeatedly prodded state-owned lenders to provide funds to the real estate sector. Strategies to improve funding to the sector was also discussed at a meeting he held with chiefs of public sector banks last month.

The finance ministry is hopeful that the move will not only improve supply of housing but will also lead to softening of prices and improve credit offtake for such projects.

Bank credit to the housing sector has only risen by 7.5 per cent to Rs 2,667 crore by November-end 2012 against a the same month of the previous year, as per the latest RBI data.

Revival plan

The plan will not only include unfinished housing projects in

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