Self-Redevelopment Loan Policy

By August 16, 2019Blog

Self-Redevelopment Loan Policy

Who will fund my society’s Self-Redevelopment project?

Let’s understand the loan policies and criteria for getting a loan approved for your Self-Redevelopment project. As of today, Mumbai District Central Co-operative Bank Ltd. (Mumbai Bank) is the only bank that provides loans for Self-Redevelopment projects.

Earlier, the Mumbai Bank would provide only construction loans but over the years, looking at the requests from Societies they introduced a special policy for supporting societies in their Self-Redevelopment projects. This policy has gone through several revisions and is now quite lucrative for societies as it gives them a better advantage and makes the process easier.

Who can take a Self-Redevelopment loan? The Mumbai Bank offers loans to co-operative housing societies that are members of the bank and have a savings bank account with the bank. A few loans have already been sanctioned and disbursed as in the case of Wedevelopment-managed projects – Jayakunj CHS and Suma Sam CHS in Borivali West, Mumbai.

When are these loans available? Loans from the Mumbai Bank are available post the society gets the ‘Intimation of Disapproval’ or IOD for the project. Societies have to fund the project themselves or seek support from external investors/ NBFCs till the IOD stage, after which they can receive the bank funding.

Lastly, what are the key features of this loan? The Bank currently funds up to 95% of project cost or up to Rs. 110 Crores, whichever is lower, at 12.5% per annum rate of simple interest and a small processing fee of 1%. Project cost considered by the Mumbai Bank includes cost of TDR, cost of premiums/ approvals/ NOCs, rent, brokerage, fees for professionals/ consultants, construction cost, cost of additional amenities like solar, etc.

The society can later repay the loan and the interest through the revenue generated from the saleable area. The bank also offers a two to three year moratorium on the loan based on the Project size. Mr. Uday Dalvi, DGM at Mumbai Bank and a key nodal officer for Self-Redevelopment, explains this – “Though interest on the loan is calculated for this period, we don’t take it until the end of two years or three years depending on the size of the project. Meanwhile, societies sell the saleable flats and pay the loan with interest. So, the society does not have to pay any interest from its pocket initially while the project needs funds.” Mr. Dalvi and his team have been the headliners in shouldering this responsibility by organizing hundreds of meetings with societies and engaging with the society members across Mumbai over the last few years to promote Self-Redevelopment.

Looking at the number of societies opting for Self-redevelopment, Wedevelopment has started approaching other banks and financial institutions too for giving further funding options for societies. Many of these banks have passed verbal approvals as well. It is expected that in the next six to eight months there will be an entry of many financial institutions in the Self-Redevelopment funding space. Even Mumbai Bank is approaching other cooperative banks to create a consortium and give benefits to more and more societies taking this initiative.