The document requests a stimulus package for the real estate industry in India. It provides suggestions in several areas: 1. An immediate stimulus plan including a one-time restructuring scheme for bank loans to real estate projects, introduction of very long term (25-40 year) home loans, last mile financing for completed inventory by banks, and setting up a real estate inventory fund. 2. Longer term measures like allowing medium (5-7 years) and long term (7-10 years) construction financing, expanding priority sector lending to include slum rehabilitation projects, increasing limits for housing loans, and reducing risk weights on housing loans. 3. The suggestions aim to provide liquidity support to ongoing projects

1. Request for
STIMULUS PACKAGE FOR REAL ESTATE INDUSTRY
Submitted to
Shri Urjit Patel
Governor – Reserve Bank of India

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Contents
Section A: Executive Summary of Suggestions ...................................................................................3
Section B: Background ........................................................................................................................5
Section C: Principles followed for drafting Stimulus Plan...................................................................6
Section D: Immediate Stimulus to Real Estate Industry (without loss to Banks) ...............................7
Section E: Long Term Stimulus to Real Estate Industry ....................................................................10

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Section A: Executive Summary of Suggestions
Immediate & Urgent: Stimulus Plan for Ongoing Projects
Sr.
No.
Suggestion Impact
D.1.1 One Time Restructuring Scheme
for Bank Loans (without loss to
Banks)
Scheme for restructuring of Principal and
additional funding Developers will be able to
Complete and deliver Projects quickly.
D.1.2 Very Long Term Home Loans of 25-
40 years to be introduced
Homes are being bought by young at age of 21-
25, they have a working life of 30-40 years. This
will bring down EMI and increase affordability.
D.1.3 Last mile finance for completion or
completed inventory by Banks
Presently Bank finance only based on balance
cost of construction. Financing subject to
stringent conditions of end-use for inventory will
create liquidity for Developers to complete the
projects.
D.1.4 Real Estate Inventory Fund from
Government of India or with an
Institution such as LIC or Sovereign
Funds of Countries
We urge you to set up an inventory funding
vehicle for financing last mile of projects through
a Fund / SPV which can access low cost long term
funding. These funds can be given for project
completion subject to security of near-complete /
completed inventory.
Medium Term: Measures to Boost Real Estate Sector
Sr.
No.
Suggestion Impact
Construction Finance
E.1.1 Banks should also give
Construction Finance for Projects
should be Medium (5-7 years) and
Long Term (7-10 years)
Presently most Banks give only 3 -5 year Loans to
Projects thus creating financial pressure.
E.1.2 Banks should be allowed to fund
approval costs, development
charges and purchase of FSI
State and Local Government has significantly
increased charges on account of approval costs,
development charges and purchase of FSI. Bank’s
finance to directly pay these charges will make
more land parcels productive.
E.1.3 Provision for CRE Loans - Standard
Assets should be reduced to bring
down the interest rate
Banks have sufficient asset cover in Real Estate
projects as unlike Industrial projects, the security
in real estate is self-liquidating. A lower risk
weight will bring down the cost of funding for

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developers and release more liquidity in the
market.
Priority Sector Lending & Affordable
Housing Projects
E.1.4 Increase in Limits for Housing Loans
under Priority Sector
The present caps on limits for housing loans to
qualify as Priority Sector are impractical in Metros
and Top 100 Cities. An increase in these caps to
bring them in line with market trends will ensure
that credit reaches the right people.
E.1.5 Finance for Slum Rehabilitation
Projects should be included in Priority
Sector
Presently, Banks have severe restrictions on
finance for Slum Rehabilitation Projects.
Adequate finance will make housing supply
available in the City as also achieve goals in the
Smart Cities and Swacch Bharat missions.
E.1.6 Long Term Bonds for Affordable
Housing – change in definition
Definition of Affordable Housing for issue of Long
Term Bonds should be aligned to the one in
Housing for All Scheme.
E.1.7 Construction Finance for Affordable
Housing Projects on special terms
Affordable Housing projects which qualify under
the definition in the Housing for All Schemes
should be considered in the Priority Sector and
Banks should extend to them the benefits of that
sector.
Housing Loans
E.1.8 Loan to Value (LTV) Ratio should be
relaxed
Will increase affordability of housing especially in
metros and urban areas.
E.1.9 Risk Weights (RW) on Housing Loans
should be minimum to reduce interest
rate for Buyers
Housing Loans are one of the least risky class of
assets for Banks. A reduction in risk weights will
bring down interest rate and benefit the Buyers.
E.1.10 Loan against Employee Provident
Fund balance to be finance house
purchase
Employees from Lower Income Group will be able
to puchase a house by using their own savings
and not have additional burden of Bank interest.

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Section B: Background
▪ Real Estate Industry is going through an unprecedented transition. On on hand we
have the opportunities driven by Government programs such as Housing for All,
Smart Cities and Make in India etc and on the other an overhang of inventory due to
rapid expansion in the Industry over the last decade.
▪ The recently passed Real Estate Regulation Act, 2016 (RERA) will bring much needed
standardization to the Industry and also help restore the faith of all stakeholders –
Customers, Bankers, Regulators, Investors and Government.
▪ On the backdrop of these developments, we have made certain practical suggestions
for the revival of the Real.
▪ We believe that these amendments will be in the interest of all stakeholders and
enable the Real Estate industry to have a smooth transition to a new era of
sustainable growth.

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Section C: Principles followed for drafting Stimulus Plan
No Loss to Stakeholders such as Government, Banks and Financial Institutions, Buyers.
Least modifications to existing Laws and Regulations.
Focus on completion and delivery of ongoing projects.
Special One Time Scheme for Ongoing Projects.

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Section D: Immediate Stimulus to Real Estate Industry (without loss to
Banks)
D.1.1 One Time Restructuring Scheme for Real Estate Projects
Present Rule
Loans to Real Estate projects cannot be restructured or can be restructured only to a limited extent
of extension by 1 year and that too in very special conditions.
Suggestions
There should be a One Time Restructuring Scheme for loans to Real Estate Projects with following
features:
Additional Moratorium: An additional morartorium on principal repayment of between 1-2 years
depending on the size of the project and stage of construction. This moratorium should also be
applicable where repayment has started and original moratorium period is over.
Special Restructuring in Interest Rate: Resetting the interest rate in two parts. Developer will service
an interest rate on monthly basis equal to rate of Home Loans charged by the Bank. The difference
in the rate as per his Sanction Letter and the Home Loan rate will be accumulated into a Working
Capital Term Loan and and repaid as bullet payment at the end of the Loan period.
Additional Working Capital: Provision of additional finance equal to 50 pc of balance cost of
construction depending on the credit assessment of the Lending Bank.
Overdue Accounts: Converting any overdues in the account upto SMA1 and SMA2 buckets into
Working Capital Term Loan and repayment of the same after in equated installments after the
moratorium as mentioned above.
SMA Reporting: Banks and Financial Institutions should be given the guidance that the SMA1 and
SMA2 Reporting should be taken into account only for information purposes. They should not use
these criteria to deny new credit facilities or takeover of existing credit facilities sanctioned upto 31st
March 2018.
Explanation
Most Real Estate projects which are struggling for completion are on account of slowdown in the
demand. Almost all Real Estate projects have adequate security and cash flow to repay loans
borrowed by Banks and NBFCs. All that is required is some extension of time to match the slower
sales cycle and some funding for completion.

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D.1.3 Very Long Term Housing Loans should be introduced
Present Rule Suggestion Explanation
Housing Loans are available
upto maximum of 20-25 Years.
Housing Loans for 30-40 years
should also be provided looking
at Profile of the Buyer.
Loans with balloning / step up
interest or EMI should be
introduced.
Buying a House is the first
aspiration of any youngster
who starts earning at the age
of 21-15. With the working
life going upto 65-70 years, a
Home Loan of 25-40 years
will substantially reduce the
burden of EMI and improve
affordability.
D.1.4 Last mile finance for completion or completed inventory by Banks
Present Rule Suggestion Explanation
Banks finance only against
construction cost.
Banks should also extend
finance against completed
inventory.
Completed inventory is the
highest possible security
available with the Developer.
Since the project / building is
complete, loan against such
inventory does not harm the
interest of the previous
buyers also.
D.1.5 Real Estate Inventory Fund
Present Rule Suggestion Explanation
Real Estate Inventory Fund
from Government of India or
with an Institution such as LIC
or Sovereign Funds of
Countries.
We urge you to set up an inventory
funding vehicle for financing last
mile of projects through a Fund /
SPV which can access low cost long
term funding. These funds can be
given for project completion
subject to security of near-
complete / completed inventory.
Real Estate industry needs
long term and low cost
funds for its sustenance
and growth and to bring
down the cost of the
apartment for the home
buyer.

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Section E: Long Term Stimulus to Real Estate Industry
Measure to streamline Construction Finance to Developers
E.1.1 Medium and Long Term Loans to Projects
Present Rule Suggestion Need
Presently Banks give loans
upto only 3-5 years for
Projects irrespective of size of
the Project.
Banks should give Medium Term
(5-7 Years) and Long Term (8-12
Year) Loans to Projects depending
on the size.
The moratorium for Principal
repayment should be equal to half
the Loan Tenure as Housing
Projects generate positive cash
flows in the later stages.
Size of Projects has
increased over the years
from a few acres to several
ten/hundred acres.
For projects in the city
outskirts the Developers
have to also create physical
and social infrastructure
which takes 2-3 years.
Sales in a project pick up
closer to completion and
hence the repayment should
be kept in that period.
E.1.2 Banks should be allowed to fund Approval and Premium Costs of a Project
Present Rule Suggestion Explanation
Banks are not allowed to
finance incidental costs of
land such as approvals.
Banks should be allowed to fund
Incidental Costs
a) Zone conversion charges
b) Premiums payable to
Planning / Sanctioning
Authorities.
c) Transferable Development
Rights / Building Rights.
These costs add to the value
of land.
In most cities the premiums
/ charges have been
increased significantly in
recent years and their
financing will ensure faster
project implementation.
E.1.3 Provision for CRE Loans - Standard Assets should be reduced to bring down the interest rate

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Present Rule Suggestion Explanation
Commercial Real Estate has
provision of 1.00 pc
The provisioning for CRE
exposure for Standard
Assets should be in line with
that of other industries ie
from 20-100% based on
Credit Rating. This will
incentivize Developers to
improve their Balance
Sheets over a period of
time.
Banks have a marketable security
in the form of land and unsold
inventory.
Hence the risk weightage should be
in line with the
The reduced risk weightage will
also enable Banks to reduce
interest rate which can be passed
on by the Developers to the
Customer.
Commercial Real Estate –
Residential has provision of
0.75 pc
(Clause 5.5)
Measures to boost Priority Sector Lending & finance for Affordable Housing
E.1.4 Increase in Limits for Housing Loans under Priority Sector
Present Rule Suggestion Explanation
Cities above 10 Lakh
population: Loan upto Rs 28
Lacs (Cost of the house upto
Rs 35 Lacs).
This limit should be
increased to loan of Rs 50
Lacs and house cost upto Rs
65 Lacs.
Whereas the Government has
come up with Housing for All
mission for the EWS and LIG
segment by way of subsidies etc,
the Middle Income Group buyer
who finances his house entirely
through home loans needs a relief
by way of lower interest rate. Due
to high land cost in the urban
centeres our suggested limits will
cover 90% of the middle income
group buyers.
Cities less than 10 Lakh
population: Loan upto Rs 20
Lacs (Cost of the house upto
Rs 25 Lacs).
This limit should be
increased to loan of Rs 50
Lacs and house cost upto Rs
40 Lacs.
This is line with definition of
Affordable Housing under
Circular for Long Term
Bonds RBI/2014-15/127
DBOD.BP.BC.No.25/
08.12.014 / 2014-15
E.1.5 Finance for Slum Rehabilitation Projects should be included in Priority Sector

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Present Rule Suggestion Explanation
Loans to Government
Agencies for Slum Clearance
Projects upto Rs 10 Lakhs per
unit is included in priority
sector lending.
Loans to Private Developers
should also be included in
this category.
Private Developers are working
extensively with Government in for
slum rehabilitation and shown
good results in delivering projects.
Supporting the Developers will
solve the twin issues of slum as
well as housing stock in city limits.
Banks do not have clarity for
creation of security as it is in
form of Development Rights
given by Government and not
land.
In SRA Schemes the security
can be taken as
Development Rights given
to the Developer against the
development being done by
him.
Development Rights have good
liquidity as they are tradable.
Hypothecation of the Cash Flows
from such sale can be good security
for Bankers.
E.1.6 Long Term Bonds for Affordable Housing - Definition of Priority Sector
Present Rule Suggestion Explanation
Banks have been allowed to
issue Long Term Bonds for
Affordable Housing Projects.
Definition of Priority Sector
should be amended as follows:
a) Affordable housing
projects definition in line
with Housing for All
Policy.
b) Slum Rehabilitation
Projects to include Loans
to Private Developers.
Banks have not issued any
Long Term Bonds under this
excellent Scheme due to lack
of eligible projects in the
Real Estate sector. We
request you to bring the
scope in line with industry
requirements.
E.1.7 : Construction Finance for Affordable Housing Projects

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Present Rule Suggestion Explanation
Construction Finance for
projects where dwelling units
cost upto Rs 10 Lakhs and
family income of the buyer is
upto Rs 2 lakhs are
considered as priority sector
lending.
Loans to Projects which satisfy the
criteria of Housing for All Scheme
should be considered as Priority
Sector for the purpose of
construction finance. The main
criteria are 30/60 sq mtrs area and
Rs 3/6 lakh of family income for
EWS and LIG buyers respectively.
Developers have started
taking up projects under the
Housing for All Scheme. The
alignment of the definition
under Housing for All
Scheme will direct bank
credit to the right projects
and thus support.
Housing Loans
E.1.8 Loan to Value (LTV) Ratio should be relaxed
Present Rule Suggestion Explanation
Loan to Value Ratio is:
Upto 20 Lacs-75%
20-75 Lacs-80%
Above Rs 75 Lacs-90%
LTV Ratio does not include
stamp duty and registration
charges.
Loan to Value Ratio should be
standard 90% for all loans.
LTV Ratio does not include
stamp duty and registration
charges.
Most of the houses are
financed by housing loans.
Housing loans to individual
buyers will also help the
Developers to improve cash
flows through faster sales.
Banks will be able to reduce
risk by converting their
Construction Finance loans
into Housing Loans.
E.1.9: Risk Weights (RW) on Housing Loans should be minimum to reduce interest rate for Buyers
Present Rule Suggestion Explanation
Loans upto Rs 30 Lacs
LTV<=80% : RW 35%
LTV >80% & <90% : RW 50%
Loans upto Rs 30 Lacs
LTV<=80% : RW 20%
LTV >80% & <90% : RW 20%
Housing Loans across categories
are the most secure and least risk
loans for Banks and NBFCs. In India
an individual makes all efforts to
retain his house by ensuring his
EMIs are paid as a house also has a
certain social status. In view of this
Loans upto Rs 30 Lacs Loans upto Rs 30 Lacs

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LTV<=80% : RW 35%
LTV >80% : RW 50%
LTV<=80% : RW 20%
LTV >80% : RW 20%
we request the Risk Weightage of
standard housing loans to be kept
at a minimum so that Banks bring
down the interest rates marginally
and benefit the borrowers.

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E.1.10 Loan against Employee Provident Fund balance to be finance house purchase
Present Rule Suggestion Explanation
Loan for Housing against EPF
not allowed
Loans for Housing against EPF to
be allowed
EPF money is long term
money of the Worker. He
cannot use it for normal
requirements. A house is
also a long term asset that
he creates. Hence allowing a
loan against the EPF balance
will be a big benefit to
Workers especiallu in the
Lower Income Group.
Contact Details
CREDAI National
National Secretariat,
703, Ansal Bhavan,
Kasturba Gandhi Marg,
New Delhi – 110 001
011-43126200