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Editorial | July 2012

Making home affordable

 The Reserve Bank of India(RBI) is expected to shortly issue final guidelines for External Commercial Borrowings (ECBs) for low-cost housing projects. This is pursuant to the finance minister Pranab Mukherjee's proposal in Budget 2012 to allow ECBs for low cost housing projects.   

It may be noted that the real estate sector is presently not permitted to issue ECBs and the proposal to allow ECBs for low-cost housing is a welcome move. RBI's final guidelines are expected to specify the means of raising funds, channels to be used and other conditions of issuance for ECBs.  

One might expect the RBI to stipulate that ECBs should be routed through the National Housing Bank (NHB) which will not only ensure the utilization of funds for the purpose of low-cost housing but also help less known developers to access credit at a significantly lower cost from the foreign markets and pass on the benefits of low cost credit to the end-users by keeping the cost of houses affordable. In the current scenario of escalating costs of homes in urban and semi-urban areas and rising interest rates, the ECB route will provide huge relief to millions of home seekers from the economically weaker and low income groups.  

Of course, in view of the worsening international economic situation, it is not going to be easy raising funds through the ECB route. Hence, ECB can be one of the measures to boost affordable housing. The Central government can help with policy measures such as raising the loan ceiling for subsidy from Rs 5 lakh to Rs 11 lakh for affordable housing units and also increasing the capital assistance limit to the developers from Rs 50,000 to Rs 80,000 per dwelling unit.  

Of course, any step that alleviates the financial burden of the economically weaker section is a step in the right direction. ECB is one such step.  
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