There are hundreds of flats/housing societies that need redevelopment in the metropolis, especially in the island city. But the existing financing model does not allow banks to fund the residents directly or even to the societies, but only a developer/builder. Also, the exiting regulations do not allow a lender to finance for the cost of the demolition of the old building as well financing the residents for their temporary stay. And if the Central Bank has its way, then it is going to change.
"We are developing a special home loan product that will enable us not only to directly fund the residents of old buildings but also to meet the demolition cost apart from cost for finding a new accommodation during the redevelopment period," said Central Bank General Manager Ram Sangapure, who is the man behind this idea.
Explaining the rationale for such a product, he said, "if the Reserve Bank allows them to launch this product, it will greatly help the residents benefit from the TDR (transfer of development right) sales. Currently, developers make huge money out of TDR sales, as they return the newly-developed flats the original owners for free. TDR means making available certain amount of additional built-up area in lieu of the area relinquished by the owner of the land, so that he can use the additional space either himself or sell it to another in need of the extra built-up area.