Tuesday, October 19, 2010

NHB Set to Tighten Rules Governing Affordable Housing

The housing regulator plans to tighten the rules governing affordable housing as it looks to ensure that projects built on subsidised priority loans are actually delivered. The National Housing Bank is working on a proposal that seeks to make it mandatory for such projects to get rated by credit rating agencies such as Crisil and CARE . “We are yet to work out the details,” said RV Verma, chairman and managing director of National Housing Bank, a housing finance institution owned by the Reserve Bank, which also functions as the sector regulator.
“We will hold discussions with the real estate industry, financial institutions, government bodies and other stakeholders before finalising the guidelines,” he said. There are over 25 developers across seven states in urban India, which offer good-quality low-cost housing in the range of Rs 3-7 lakh.

The move to get ratings is aimed at bringing in transparency and discipline into the market and enhancing allround confidence. “Better and credible information will be available in the market, which will benefit all stakeholders,” Mr Verma said. If the proposal sails through, the financing institutions will be in a better position to provide lending to real estate projects, both directly and indirectly.

“Ratings will provide us with the comfort that loan to such groups or buyers in that project will not turn into non-performing assets,” said a senior official with the country’s largest lender, State Bank of India . The ratings will also be a useful indicator of the quality of the project and the developer. It will also provide information on the current standing of the project. The move has also found favour with other government arms. According to an official with the ministry of housing and urban poverty alleviation, credit rating will encourage builders as they’ll also be sure of credit being made available to them.

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