Rajiv Awas Yojana Scheme

The Union Cabinet today approved the establishment of the Credit Risk Guarantee Fund Trust (CRGFT) for Low Income Housing. The CRGFT will have an initial corpus of Rs.1200 crore of which Rs.1000 crore is being contributed from the Centre and the remaining Rs.200 core will come from the State Governments who draw on it, in accordance with their slum populations. This is in pursuance of the approval of the Rajiv Awas Yojana (RAY) Scheme by the Cabinet Committee on Economic Affairs (CCEA) in June 2011 which included the creation of a Risk Guarantee Fund for low income housing loans. The urban affordable housing deficit is estimated to be about 26 million. The total housing loan outstanding was about Rs.3.06 lakh crore of which only about 24% is for loans up to Rs.5 lakhs of which only a part is estimated as flowing to the Economically Weaker Sections and Low Income Groups. The establishment of such a Government-supported Credit Risk Guarantee Fund would facilitate credit enablement of the urban poor and the flow of institutional finance for affordable housing. The CRGF is intended to act as a risk-mitigant, thereby enhancing the confidence of the lending institutions in lending to this segment. The CRGF Trust will administer and operate the Credit Risk Guarantee Fund Scheme (CRGF Scheme). The key principle of the CRFG Scheme is that the lender shall secure the housing construction/ upgradation loan purely on the assets financed, without any other collateral. The Trust will guarantee the housing loans made by the lending institutions like Commercial Banks, Regional-Rural Banks. Housing Finance Companies, Cooperative Housing Finance Societies etc. to new or existing individual EWS/LIG borrowers and eligible borrowers forming a group or housing society of at least 20 members for purposes of home improvement, construction, acquisition, and purchase of new or second hand dwelling units of size up to 430 sq.ft. (40 sq.mtrs.) carpet area involving an amount not exceeding Rs.5 lakh per loan without any collateral security and / or third party guarantees. The guarantee cover available under the CRGF Scheme is to the extent of 90% of the amount in default subject to the ceiling of 90% of the sanctioned housing loan amount for a loan amount of upto Rs.2 lakh and 85% of the amount in default subject to the ceiling of 85% of sanctioned housing loan amount for loan amounts above Rs.2 lakh and upto Rs.5 lakh. The Credit Risk Guarantee Fund Trust will be set up under the Indian trust Act, 1882 and the Ministry of Housing & Urban Poverty Alleviation (HUPA) will be the settler of the Trust. The Trust shall be managed and administered by a Board of Trustees with cross sectoral composition. The Trust shall be serviced by the National Housing Bank (NHB). The Ministry of HUPA and State Governments may make further contributions to the corpus fund of the Trust in the proportion as may be decided from time to time. The Credit Risk Guarantee Fund is expected to catalyse a flow of credit of about Rs.20,000 crore to the low income housing sector and create the enabling environment for creation of affordable housing stock. The availability of bank credit without the constraint of collaterals / third party guarantees would be a key enabler for the urban poor to realise their objective of upgrading/buying their own house.