Nod for low-income housing credit risk fund

New Delhi, March 23 (IANS) The union cabinet Friday approved the establishment of the Credit Risk Guarantee Fund Trust (CRGFT) for low income housing to ensure affordable housing stock.

The CRGFT will have an initial corpus of Rs.1,200 crore of which Rs.1,000 crore is being contributed from the central government and the remaining Rs.200 crore will come from the state governments who draw on it, in accordance with their slum populations, said a release after the cabinet meeting chaired by Prime Minister Manmohan Singh.

The decision comes 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 percent is for loans up to Rs.5 lakh, of which only a part is estimated as flowing to the economically weaker sections and low income groups, the release said.

"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," it said.

"The CRGF is intended to act as a risk-mitigant, thereby enhancing the confidence of the lending institutions in lending to this segment," it added.