The policy regarding ECB for the low cost affordable housing projects has been recently reviewed in consultation with RBI and has been rationalized as under:

• Developers/builders should have a minimum of three (3) years’ experience in undertaking residential projects as against five (5) years prescribed earlier and should have good track record in terms of quality and delivery.

• The condition of minimum paid-up capital of not less than INR 50 crore, as per the latest audited balance sheet, for HFCs has been relaxed. However, the condition of the minimum Net Owned Funds (NoF) of Rs. 300 crore for the past three financial years remains unchanged.

• The aggregate limit for ECB under the low cost affordable housing scheme is extended for the financial years 2013-14 and 2014-15 with a ceiling of USD 1 billion in each of the two years, subject to review thereafter.

• The ECB availed of by developers and builders shall be swapped into rupees for the entire maturity on fully hedged basis.

It is expected that ECB scheme for low cost affordable housing will supplement funds available to low cost/affordable housing project developers form domestic banks/financial institutions. This will also reduce the cost of capital and resultantly reduce the cost of construction and housing in the country.

In the Union Budget 2012-13, an External Commercial Borrowing (ECB) provision was made for low cost affordable housing projects as a permissible end-use. The said Budget announcement was implemented by RBI vide its A.P. (DIR Series) Circular No. 61 dated December 17, 2012. Under this scheme, ECB can be availed under approval route by developers/builders and National Housing Bank (NHB) for low cost affordable housing projects. The ECB proceeds shall, however, not be used for acquisition of land. Housing Finance Companies (HFCs) and NHB can also avail themselves of ECB for financing prospective owners of low cost affordable housing units.

This was stated by Minister of State for Finance, Shri Namo Narain Meena in a written reply to a question in Lok Sabha today.

External Commercial Borrowing for low cost housing permitted under approval route, requiring full rupee hedging for maturity. The policy authorises External Commercial Borrowing (ECB) for low cost affordable housing under approval route, requiring developers to have at least three years' experience and a good track record; HFC paid up capital thresholds have been relaxed while minimum Net Owned Funds requirements remain. ECB proceeds cannot be used for land acquisition. Aggregate scheme limits apply and ECBs taken by developers and builders must be swapped into rupees for the entire maturity on a fully hedged basis. NHB and eligible HFCs may also utilise ECBs to finance prospective owners.