Govt bars cos from raising ECBs for townships
The cos would be able to tap ECBs at lower interest rates as govt has cut in the upper limit by 50-100 bps.
By PTI |
NEW DELHI: To arrest excessive capital flow into the real estate sector, the government on Friday said companies would not be allowed to tap external commercial borrowings (ECBs) for developing integrated townships.
Hitherto, ECBs were not permitted for the real estate sector, but development of integrated townships is excluded from the term 'real estate' for the purpose.
But now, the government has decided to bar companies from raising ECBs for developing integrated townships, those built on at least 100 acres of land.
An official statement issued here said, "It has been decided to withdraw the exemption accorded to the development of integrated township."
Meanwhile, the companies would be able to tap ECBs at lower interest rates as the government has also announced cut in the upper limit of the cost for ECBs by 50-100 basis points in view of the upgradation of the country's sovereign credit ratings.
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Now such borrowings of 3-5 year maturity period could be raised at the rate of up to 150 basis points above the global benchmark LIBOR against 200 points at present. Those borrowings maturing after five years could be raised up to 250 basis points above LIBOR against 350 currently.Both the modifications will come into effect on the date of notification of directions to be issued by the RBI under the Foreign Exchange Management Act, the statement said.
The RBI had already cautioned against an asset bubble in the real estate sector. The central bank had recently sought clarification from six real estate companies on their proposal to raise ECBs aggregating 28 million dollars.
The RBI has reportedly sought details on the ECB issue of Shewalkar Developers amounting to $3 million, Singapore Realty ($3.36 million), Malwan Hotels ($8.8 million), Highland House ($2 million), Appu Hotels ($10 million) and Kalinga Hospital ($0.4 million).
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