A Co-operative Housing Society in Mumbai
A Co-operative Housing Society in Mumbai
File Photo

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. MSCB is the guardian bank of all DCBs. 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 co-operative 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. Gajanan Dongre whose building at Eksar Road at Borivali underwent self-redevelopment by obtaining finance from MDCCB told, "The decision to carry out self-redevelopment was good. In just two and half years' time period the new building was ready. We initiated self redevelopment in 2010 and it was Mumbai's first building to do so and at that time only MBCCD was the only bank granting a loan for such schemes. We borrowed Rs 2 crore and returned all money immediately by selling additional flats. The three-storeyed old building was constructed to new seven floors."

Meanwhile, he asserted that RBI should roll back such a decision to encourage tenants to undertake self-redevelopment as many hesitate to undergo redevelopment due to no-confidence on builders and instead decide to stay in rickety structures.

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Free Press Journal