Industry players expect the Reserve Bank of India's (RBI) move to allow real estate developers raise funds from External Commercial Borrowings (ECB) would increase the supply of low-cost houses.
It may be recalled that the central bank allowed developers and housing finance companies to raise a maximum of $1 billion for affordable housing.
The ECB window will help developers raise resources at cheaper rates, thereby encouraging them to build low-cost houses, RV Verma, Chairman and Managing Director of National Housing Bank said.
Some reports hint that many developers are planning to tap the ECB route to develop affordable housing projects. Besides saving on interest cost, the window gives developers an alternative route to raise funds at a time when they are facing a liquidity crunch with little or no access to project finance through domestic sources.
Industry sources informed that a developer may raise funds at an all-in cost of a maximum 10 per cent compared to the interest rate of 13-15 per cent charged by domestic lenders.
Developers such as Mantri Realty, Provident Housing and Value and Budget Housing Corporation (VBHC) have lined up to tap this window, reports indicate.