Housing finance companies (HFCs) are calling on the government to revitalize the Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) by increasing the home loan guarantee cover from INR 75 lakh to INR 1.25 crore. They propose up to 75% guarantees on loans of INR 2.25 crore, aiming to attract a wider low-income demographic across 124 districts. The suggested overhaul includes replacing the current scheme, which has seen little uptake since its inception in 2012, and accommodating loan amounts of up to INR 25 lakh. Recommendations also involve annual guarantee cover fees for mortgage lenders.
Housing finance companies (HFCs) have urged the government to revamp the Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) and to raise the guarantee cover for home loans from the current limit of INR 75 lakh to INR 1.25 crore, according a report published by ET Realty. HFCs have requested a guarantee cover of up to 75% on home loans of INR 2.25 crore. Currently, the scheme, which has a budgetary allocation of INR 7,550 crores, offers up to a 90% guarantee for home loans of up to INR 72 lakh and up to an 85% guarantee for loans between INR 2 lakh and INR 5 lakh.
Sources indicated that the revamped scheme aims to include a broader range of customers within the low-income housing category across 124 districts and will complement the Pradhan Mantri Awas Yojana (PMAY). The CEO of one of the largest affordable housing financing firms, who preferred to remain anonymous, stated that chief executives from leading housing finance companies have urged the government to overhaul the current low-income housing scheme, which has seen little interest, and expand its scope to accommodate home loans of up to INR 72.5 lakh. It was also mentioned that the Union cabinet is currently reviewing this proposal, with a note outlining the details of the proposed scheme having been circulated.
According to the proposed scheme, the Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) should be completely revamped and replaced with a new initiative that expands the eligibility for home loans to include amounts up to INR 25 lakh. While the proposal suggests a guarantee cover of 75%, the government is also considering a 60% cover option. Notably, smaller loans would receive a larger guarantee.
The recommendations from housing finance companies (HFCs) also include a guarantee cover fee ranging from 50 to 75 basis points, which would be paid annually by mortgage lenders. The CRGFTLIH was originally introduced in 2012, but it struggled to gain traction due to its limited scope.
The CEO of another housing finance company stated that if the existing scheme is expanded to cover higher loan amounts in areas with a shortage of housing, it would encourage affordable housing companies to explore these markets and take risks with new-to-credit customers. Under the credit risk guarantee scheme, the trust provides a credit risk guarantee fund to lending institutions for housing loans up to INR 35 lakh. These loans are offered to borrowers from economically weaker sections and lower-income groups in urban areas without the need for collateral security or a third-party guarantee.
The proposed changes to the CRGFTLIH aim to stimulate the affordable housing sector by making it more accessible to low-income families. By broadening eligibility and increasing loan limits, the government could foster a more inclusive housing finance environment, encouraging HFCs to support new borrowers in underserved markets.
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