Up to Rs 300,000 interest-free loan to earthquake beneficiaries

Kathmandu, October 9

Beneficiaries of the government’s housing grant will be able to obtain interest-free credit of up to Rs 300,000 against the collateral of their under-construction house.

The Cabinet meeting today amended the guideline on extending interest-free credit to earthquake victims in group guarantee and introduced the provision through which the beneficiaries will be able to obtain loan against the collateral of the houses under construction.

The National Reconstruction Authority (NRA) had proposed to amend the aforesaid guideline to the Cabinet as the banks and financial institutions (BFIs) seemed reluctant to issue loans to the quake-affected in group guarantee. However, as the new provision allows BFIs to float loans against collateral of the under-construction house, the move is expected to facilitate quake-affected families in obtaining loans easily, according to Govinda Raj Pokharel, CEO of NRA.

“Interest-free credit will be instrumental to build quake-resilient houses in the quake-hit districts as the beneficiaries will be able to mobilise up to Rs 600,000, including the government’s grant worth Rs 300,000, for reconstruction of their house.” He expressed hope that the individual house reconstruction will gather pace along with the enforcement of new provision.

All the BFIs licensed by the Nepal Rastra Bank, including microfinance institutions, can float loans against collateral of houses under construction or group guarantee. The NRA has already discussed with the central bank to make the interest-free credit effective through the BFIs.

BFIs will be able to fix the interest rate by adding up to two percentage point on operational cost. The Nepal Rastra Bank will bear the interest and insurance charges and release payment to the concerned BFIs every trimester, according to Yam Lal Bhoosal, spokesperson for NRA.

Borrowers have to repay the loan within five years.

BFIs have to appoint the contact person to address the grievances of the quake-affected.

Currently, a total of 130,234 houses are under construction and 50,251 houses have already been constructed, according to NRA. A total of 765,618 quake survivors have been listed as beneficiaries to obtain the government grant in quake-affected 31 districts.

According to the NRA, 640,274 households have already signed grant agreement with the local bodies to obtain the government grant. Of them, 609,940 have obtained first tranche worth Rs 50,000 to start the reconstruction of their house, 79,114 have obtained second instalment worth Rs 150,000 and 7,994 have obtained third tranche worth Rs 100,000.

Beneficiaries have to develop the foundation from the first tranche; build structure and walls from the second tranche, while the third tranche is provided for the roofing purpose. Also, 25 per cent of the third instalment needs to be invested for solar energy or bio-gas.Engineers deployed by the NRA must approve that the houses being rebuilt using government’s grant have followed the safe building codes set by the government for the release of second and third tranche.