Govt may soon announce fund to offer home loan guarantees for non-eligible borrowers

To aid the debt-ridden housing sector, the Centre plans to create a fund to help otherwise ineligible housing loan customers, a senior Finance Ministry official told The Economic Times.

India's real estate sector has been under heavy debt, plagued by stalled projects and unsold homes. "This fund would essentially support borrowers who are not eligible for a loan from a bank," the article quotes the official as saying.

The step could especially benefit those without steady income flows and credit histories, the group that has traditionally turned towards the informal sector for high-cost credit. Under the fund, a borrower will be able to avail guarantee for a small fee, thereby allowing them to secure a home loan.

This comes amid the government's push to revive the ailing sector that has been witnessing a slowdown in demand, aggravated by the fund crunch in non-banking finance companies (NBFCs) which was sparked by the IL&FS fiasco late last year.

To facilitate completion of stalled projects, the government is also considering the feasibility of a stressed asset fund under the comprehensive package, which is in the works for the housing sector.

In her address in Chennai on September 10, Finance Minister Nirmala Sitharaman said a package for the sector will come 'sooner rather than later'.

However, a Finance Ministry official told CNBC-TV18 that loan sanctioning authority rests with the banks and hence it cannot be said if a fund to provide guarantees to ineligible borrowers can be set up.

(This copy has been updated with the latest developments.)