HCFs Propose Higher Guarantee Cover for Home Loans Up to Rs 25Lakh

                Housing finance companies (HFCs) have proposed to the government to revamp the Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) and increase guarantee 
cover for home loans up to ₹25 lakh from the current ₹5 lakh, two people aware of the development said.
HFCs have sought a guarantee cover of up to 75% on a ₹25 lakh home loan. The current scheme, which has a budgetary allocation of ₹550 crores, provides up to 90% guarantee for 
home loans up to ₹2 lakhs, and up to 85% for loan amounts of ₹2-5 lakh.
People said the revamped scheme will include a wider set of customers in the low-income housing category in 124 districts and it will be in addition to the Pradhan Mantri Awas Yojana 
(PMAY).
"Chief executives of top housing finance companies have proposed to the government to revamp the scheme for low-income housing which presently has no takers and widen its 
scope to include home loans up to ₹25 lakh," the CEO of one of the largest affordable housing financing firms said asking not to be named. "The Union cabinet is considering the 
proposal, a note has been floated which has the contours of the proposed scheme.”
As per the proposed scheme, the CRGFTLIH should be overhauled and replaced with a new scheme which will be widened to include home loans up to ₹25 lakh. While the proposal 
is to give a guarantee cover of 75%, the government could also be considering a 60% cover. A smaller loan will have a bigger guarantee.
The recommendations by HFCs also talk about a 50-75 basis points guarantee cover fee that will be borne by mortgage lenders annually.
CRGFTLIH was first introduced in 2012 but never took off due to the narrow scope of the scheme.
"If the current scheme is widened to include a higher loan amount in housing-starved districts, it will give impetus to affordable housing companies to venture into these territories and 
take risks with new to credit customers," said the CEO of another housing finance company.
Under the credit risk guarantee scheme, the trust gives a credit risk guarantee fund to lending institutions against their housing loans up to ₹5 lakh. The loans are granted to borrowers 
in the economically weaker section and lower income groups in urban areas without requiring any collateral security and a third-party guarantee.


Source: Economic Time