In a major boost to self-redevelopment of cooperative housing societies, the Reserve Bank of India (RBI) has included them in the list of allowed borrowers for housing finance loan. This is for the first time that cooperative housing societies have been allowed to borrow from housing finance companies (HFCs). Earlier, societies in Mumbai could obtain loan for self-redevelopment only from the Mumbai District Co-operative Bank.
Scarcity of open land means that Mumbai can now develop only through redevelopment. The current template of developer-led redevelopment is a failure, often not delivering the promised homes, and definitely not in the volumes required. Self-redevelopment appears to be the panacea. The authorities must tweak the financial ecosystems to align to this new reality.
In a master direction issued last month RBI said, “Housing finance shall mean financing for purchase/construction/reconstruction/renovati-on/repairs of residential dwelling units which includes loans to individuals or group of individuals including co-operative societies for construction/purchase of new dwelling unit.”
Activist Chandrashekhar Prabhu said it is good news as it would encourage more societies to take up self-redevelopment. “There are 150 HFCs registered with the RBI many of whom have loaned to builders who have defaulted and these companies have lost money. It would be safer for them to lend to housing societies. HFCs can take money from National Housing Bank and disburse this to housing societies,” he said. Prabhu said that he would urge the RBI to further allow nationalised and private banks to lend directly to cooperative societies for self-redevelopment. “Today, no rule stops banks from loaning to housing societies, but the problem is that in case of default who will be responsible. The government seems apprehensive about these societies when they are the safest to lend to as they are middle-class people and will not default,” he added. But Salil Rameshchandra, president, Federation of Grantees of Government Land, said the RBI needs to do more. “Many societies are in need of redevelopment, as their plot size is small, no builder is interested. The RBI must prepare guidelines on how non-banking finance companies (NBFC), HFCs and all banks can provide support to such societies.”. On the likelihood of societies defaulting on repayment, Rameschandra said it is very unlikely as residents would be the biggest losers if they do not redevelop in time. “The norms for housing societies need to be more relaxed than what they are for builders. The RBI needs to look at the changing housing scenario and make guidelines accordingly,” he suggested.
