The Rs 4,000-crore refinance package from the National Housing Bank (NHB) to housing finance companies (HFCs) will be available at 8 per cent interest.
The concessional rate of interest will apply to loans up to Rs 20 lakh. However, the period of finance will be assessed on a case-by-case basis depending on each HFC.
The move is expected to bring down the cost of funds for cash-strapped HFCs and subsequently bring down their interest rate on home loans up to Rs 20 lakh.
“The disbursement pattern and the tenure of loan will depend on the requirement of each HFC. A circular regarding this will be issued shortly by NHB,” a top official at NHB told Business Standard.
There will be no cap on the interest rate that an HFC can charge for such loans after availing itself of the facility. “Since the cost of funds for HFCs is expected to come down, the general benefit of the lower cost should be passed on to borrowers,” the NHB official added.
The composition of the fund will also depend on the period sought for by HFCs.
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According to a source familiar with the development, the fund will be available up to March 31, 2010. “After that, it will be converted into normal refinance and interest rates will be linked to the prime lending rate of an NHB,” he said.
He also added that there would be a cap on the extent of support through this route for a particular HFC.
On December 5, the Reserve Bank of India (RBI) proposed a Rs 4,000-refinance window for NHB, the regulator for HFCs.