No ECB for developing townships

NEW DELHI: To arrest excessive capital flow into the real estate sector, the government on Friday said companies would not be allowed to tap the external commercial borrowings (ECBs) route for developing integrated townships .

These are townships that are built  on at least 100 acres.

Till now ECBs were not permitted for the real estate sector, but development of integrated townships was excluded.

The government has also announced a cut in the upper limit on the cost of ECBs by 50-100 basis points in view of the upgradation India’s sovereign credit rating.

Now borrowings of 3-5 year maturity period could be raised at a rate of up to 150 basis points above the benchmark London Interbank Offered Rate against 200 points at present.

Borrowings maturing after five years could be raised up to 250 bps over 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.