The role of commercial banks in apartment development
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04-08-2009 | 03:02 AM
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The role of commercial banks in apartment development
The share of commercial banks in providing housing finance has been on a limited scale, and that too has been mainly confined to provision of indirect finance. As at the end of December 1988, the outstanding housing finance allocated by the scheduled commercial banks amounted to just Rs.1,088 crore. Out of this only a paltry sum of Rs.69 crore comprised direct finance to individuals and groups of individuals constituting cooperative societies. The balance of Rs.1,019 crore comprised indirect finance either by way of loans to Housing Boards and Housing Finance Corporations (HFCs) or investment in guaranteed bonds of Housing and Urban Development Corporation (HUDCO) and Housing Boards.
With a view to increasing their share in housing finance, the quantum earmarked for housing finance by the commercial banks was raised from Rs.160 crore in 1987 to Rs.225 crore in 1988 and Rs.300 crore in 1989. The banks were also advised by the Reserve Bank of India to compute their share of housing finance at 1.5 percent of the incremental deposits.
The housing sub-targets were fixed as follows:
• At least 30 percent of the allocation should be reserved for direct lending to individuals including cooperatives. Of this at least half should be disbursed in rural and semi-rural areas
• Thirty percent may be utilized for term loans to HFCs, housing boards and other public housing agencies.
• The balance 40 percent may be channeled by way of subscription to guaranteed bonds and debentures of National Housing Bank (NHB) and HUDCO
In order to mobilize additional resources for the housing sector, a savings linked loan scheme called – Home Loan Account Scheme has been introduced by the NHB from 1st July 1989. The basis feature of the scheme is that if an individual saves regularly for a minimum period of 3 to 5 years, he is assured a housing loan as a multiple of his accumulated savings including the interest earned thereon. The scheme is at present operated through scheduled commercial banks. It is suggested that other housing finance institutions in joint and private sectors may also be permitted to operate this scheme. Due to the high cost of apartments Cochin City’s leading commercial banks have put this scheme to not only generate significant profits but also to cater to the needs of a vast section of the urban population.
With a view to increasing their share in housing finance, the quantum earmarked for housing finance by the commercial banks was raised from Rs.160 crore in 1987 to Rs.225 crore in 1988 and Rs.300 crore in 1989. The banks were also advised by the Reserve Bank of India to compute their share of housing finance at 1.5 percent of the incremental deposits.
The housing sub-targets were fixed as follows:
• At least 30 percent of the allocation should be reserved for direct lending to individuals including cooperatives. Of this at least half should be disbursed in rural and semi-rural areas
• Thirty percent may be utilized for term loans to HFCs, housing boards and other public housing agencies.
• The balance 40 percent may be channeled by way of subscription to guaranteed bonds and debentures of National Housing Bank (NHB) and HUDCO
In order to mobilize additional resources for the housing sector, a savings linked loan scheme called – Home Loan Account Scheme has been introduced by the NHB from 1st July 1989. The basis feature of the scheme is that if an individual saves regularly for a minimum period of 3 to 5 years, he is assured a housing loan as a multiple of his accumulated savings including the interest earned thereon. The scheme is at present operated through scheduled commercial banks. It is suggested that other housing finance institutions in joint and private sectors may also be permitted to operate this scheme. Due to the high cost of apartments Cochin City’s leading commercial banks have put this scheme to not only generate significant profits but also to cater to the needs of a vast section of the urban population.
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