Lok Sabha Question No. 2914 (UNSTARRED), answered on 2016-08-03
Subject: Criteria for Loan by HUDCO
Ministry: HOUSING AND URBAN  POVERTY ALLEVIATION
Asked by: B. S. YEDDYURAPPA

## GOVERNMENT OF INDIA

## MINISTRY OF HOUSING AND URBAN POVERTY ALLEVIATION LOK SABHA

UNSTARRED QUESTION NO. 2914

TO BE ANSWERED ON AUGUST 3, 2016

## CRITERIA FOR LOAN BY HUDCO

No.  2914 SHRI B.S.YEDIYURAPPA

Will the MINISTER OF HOUSING AND URBAN POVERTY

ALLEVIATION be pleased to state:

- (a): The provisions and criteria for providing loans by Housing and Urban  Development  Corporation  Limited  (HUDCO)  for  various schemes;
- (b): The number of schemes financed by HUDCO during each of the last three years;
- (c): Whether  some  schemes  financed  by  HUDCO  have  not  been approved by some State Governments during the said period;
- (d): If so, the details thereof and the reasons therefor; and
- (e): The corrective steps taken/being taken by the Government to
- make HUDCO financed schemes more viable for the States?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF  HOUSING  & URBAN POVERTY ALLEVIATION (RAO INDERJIT SINGH)

- (a): The provisions and criteria for providing loans by Housing and
- Urban  Development  Corporation  Limited  (HUDCO)  for  various schemes  primarily  cover  the  aspects  of  technical  feasibility, financial viability and legal eligibility. The loan is offered based on  availability  of  security  and  repayment  mechanism.    The broad details of provisions and criteria are placed at Annexure-1.

- (b): The details of number of schemes financed by HUDCO during the last 3 years and during the current financial year 2016-17 (as on 30.06.16) are as follows:
- (c) to(e): Financial assistance for schemes is sanctioned by HUDCO along  with  certain  pre-conditions  to  be  satisfied  by  the State Govt./Public agencies.  In certain instances, actual disbursement  under  schemes  financed  by  HUDCO  may not take place for lack of compliance  of the preconditions.

|   Sl. No. | Years                      |   No. of Schemes |
|-----------|----------------------------|------------------|
|         1 | 2016-17 (as on 30.06.2016) |               40 |
|         2 | 2015-16                    |              202 |
|         3 | 2014-15                    |              162 |
|         4 | 2013-14                    |              134 |

HUDCO's lending terms are competitive. Towards helping the Economically Weaker Section (EWS) and Lower Income Group (LIG) households, HUDCO  extends a number  of  facilitatory  provisions  for  projects  for  this group. This includes waiver of non-refundable Application Fee for EWS & LIG category housing projects; Waiver of non-refundable  Front-End-Fee  for  EWS  &  LIG  Category housing  projects;  levy  of  Lower  Interest  rate  for  EWS  & LIG  Category  housing  projects;  and  permitting  longer duration for repayment  in respect of  EWS  and  LIG Housing  projects. Similarly, special focus is laid on supporting  core  infrastructure  facilities  such  as  water supply,  sewerage,  drainage,  solid  waste  management, city  roads,  social  infrastructure  etc,  with  comparatively lower interest rates.

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The  provisions  and  criteria  for  providing  loans  by  Housing  and Urban  Development  Corporation  Limited  (HUDCO)  for  various schemes for Public sector:

HUDCO  provides  loan  assistance  to  State  Governments  for  a variety  of  projects  both  in  housing  and  infrastructure  sector. HUDCO  provides  loans  directly  to  State  Governments  (drawn through various Departments), Urban Local Bodies (like Corporations, Municipal Bodies, etc),  and also to agencies of the State Governments like Housing Boards, Development Authorities, Slum Clearance Boards, Water supply and Sewerage Boards, etc. The loan is offered to State Governments based on availability  of  security  and  repayment  pattern.  The  nature  of security  and  repayment  pattern  may  vary  depending  on  the type/nature of the project.

Broadly,  for  Government/public  agencies  any  of  the  following securities is required:

- 1) State Government guarantee
- 2) Bank guarantee
- 3) Equitable mortgage of land and building with 125% security coverage  on  loan  amount  with  no-lien  account  for  the project receivables. Equitable mortgage can be either
4. project property or any other property of the agency.
- 4) Equitable mortgage of `land and buildings' and/or hypothecation of movable assets like equipment/machinery, computers furniture and
6. buses, fixtures, office equipments, etc (125% coverage)
- 5) In case of direct borrowing by State Government,
8. Government of India's permission for borrowing the loan.
- 6) Negative  lien  may  be  accepted  in  case  of  Government  of India Maharatna / Navratna / Miniratna Companies.

Any one of the following can be additional security:

- 1) Structured repayment through budgetary provision
2. (RBI/Treasury Account)
- 2) Any other additional security depending on risk perception
4. to be decided by HUDCO based on project appraisal. In case
5. of consortium, the security prescribed for the project will be on pari-passu basis.
- 3) Structured escrow mechanism against identified receivables such as taxes/fee/charges, etc with coverage of 150% as pass through revenue (Electricity Boards, Corporations,  Local  Bodies  etc.)  can  be  considered  as special  case  based  on  financial  health  of  organisation  and dedicated  flow  of  receivables  with  one  quarter/principal interest of the loan drawn as loan term debt reserve.

Normally, HUDCO provides up to 90% of the project cost as loan, and the repayment normally goes up to 15 years depending on the nature  of  the  project.  The  interest  rates  vary  depending  on  the nature of the projects, ranging from 8.65% (fixed rate) to 12.25% (floating) for State Government PSUs/Agencies for power projects.    The  State  Government  borrowings/rated  government agencies  (`AA'  &  above  or  equivalent  rating  by  SEBI  and  RBI registered Credit rating Agencies) however, would get a reduction in the interest rate by 0.25%.  For agencies rated as `A' and above but  below  `AA'  or  equivalent  rating  by  SEBI  and  RBI  registered credit rating agencies, a fixed rebate in the form of reduction in the  interest  rate  by  0.15%  would  be  available.      For  agencies rated  as  `BBB'  and  above  but  below  `A'  or  equivalent  rating  by SEBI and RBI registered credit rating agencies, a fixed rebate in the  form  of  reduction  in  the  interest  rate  by  0.10%  would  be available.  This  is  subject  to  borrower  maintaining  the  specified rating during entire tenure of loan. The rebate in interest rate as per specified norms shall however be available during the validity of  rating  i.e.  from  the  date  of  rating  or  date  of  release  of  loan, whichever is later and up to validity of rating. The borrower shall also  submit  annual  rating  before  end  of  each  financial  year. Further, in case of subsequent downgrading of rating  below the specified  rating  or  non-submission  of  annual  rating    before  the end  of  financial  year,  interest  rates  applicable  to  `Not-rated' borrowers  shall  become  applicable  from  1st  day  of  next  billing date for the period rating remains downgraded/not submitted.

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