No loans for self-redevelopment projects of housing societies

Mumbai District Central Co-operative Bank Director to approach NABARD and RBI over the subject

No District Cooperative Banks (DCB) can finance self-redevelopment projects of housing societies as it falls under the purview of 'commercial real estate' and against the loan policy, The Reserve Bank of India (RBI) informed the Maharashtra state cooperative bank (MSCB) on Wednesday. The MSCB is the guardian bank of all DCBs. The RBI further instructed that all DCBs should stop the disbursement of loans for the self-redevelopment of cooperative housing societies.

Abhishek Ghosalkar, director of Mumbai District Central Co-operative Bank (MDCCB), told the Free Press Journal that they will approach the NABARD and RBI and request them to consider the self-redevelopment loans outside the purview of 'commercial real estate' so that it can be sanctioned to the member of the housing societies.

"District Co-operative Banks have been really very helpful to housing societies in providing them loans at a lower rate of interest as compared to the nationalised banks for undertaking self-redevelopment. The loan is granted against mortgage of the society's papers, hence the process is safe. In Mumbai, there have been instances in the past where builders have eloped and the projects have remained stuck. Moreover, builders stop paying rents to the tenants. Considering all such issues, the Maharashtra government had promoted self-redevelopment and a Government Resolution (GR) in December 2019 was also issued wherein MDCCB was involved," said Ghosalkar.

According to an RBI rule, DCBs are authorised to grant loans to farmers and sugar factories and those institutes that are under cooperative act. However in Mumbai, as there is no farming, the MDCCB can give a loan related to fishing activity and affiliated cooperative housing societies.

Ghosalkar clarified that only a few days before the MSCB has sent them an email alerting them to not finance the self redevelopment projects. The mail as sent following the reply from RBI on their (MSCB) proposal of February 2020 allowing DCBs to finance such self redevelopment schemes.

Meanwhile, MDCCB has to date pre-sanctioned loans for self-redevelopment of housing societies to the tune of Rs 1,350 crores. While the bank has already disbursed Rs 16.69 crores to housing societies for self-redevelopment. The MDCC Bank has 9,323 member housing societies of which there are 19,000 registered cooperative housing societies who are also members of the Housing Federation Mumbai District.