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About Loans for Warehouse
India is a land of agriculture. It is the largest producer of many crops and agricultural products in the world. Crops are transported across the country throughout the year while a huge part of them is exported outside the country too. One of the major challenges hampering the growth of agricultural sector is finding ways to store them adequately. The abundant produce requires high quality storage solutions until they reach the end consumer. The Warehouse Development and Regulatory Authority of India assists in setting up of warehouses and cold storage facilities to aid producers.
There is a huge demand for warehouses that are easily accessible and provide high protection from natural calamities, rodents and other damaging elements. Banks and other financial institutions have numerous loan products to aid in the building and setting up of a warehouse.
NABARD – National Bank for Agriculture and Rural Development, comes in first with its financial assistance scheme for setting up of warehouse, cold storage and cold chain infrastructure.
State Bank of India, Bank of India and IDBI Bank too have loan schemes specifically for setting up of warehouses and cold storage infrastructure.
Business viability of Warehouse and cold storage infrastructure
Farmers involved in agriculture and allied activities are constantly faced with the hindrance of product storage. Every year losses in lakhs is incurred due to insufficient or inferior storage solutions. Hence, there is a high demand for quality warehousing and cold storage solutions throughout the country. Also, the Government has founded numerous schemes to help individuals and organisations to set up warehouses that can benefit millions of agriculturists. One should act prudently and utilize these facilities to set up a warehousing facility which will prove to be a profitable business enterprise.
Warehouse Loan - Cost Covered
Warehouse loans are provided for creation of storage infrastructure in the rural areas of the country to aid and assist farmers to store their farm produce. Storage infrastructure refers to –
- Warehouses
- Silos
- Cold storage, Controlled Atmosphere (CA) Stores
- Cold Chain Infrastructure Activities like Pack Houses/ Integrated Pack Houses, Reefer Vans, Bulk Coolers, Individually Quick-Frozen Units, Chilling/ Freezing Infrastructure, etc.
- Loans for modernization/improvement of the existing storage infrastructure projects might be considered provided it leads to scientific/additional storage capacity
The primary aim of providing financial assistance for warehouse set up is to assist farmers in realizing the full benefit of their farm produce and to prevent distress sale of the produce due to fear of spoilage.
Who are eligible for a Warehouse loan?
- Individuals / Farmers
- Proprietary and partnership firms
- Co-operatives, Agro-processing co-operative societies
- Corporations, Agro-Industrial corporations
- Agricultural Produce Marketing Committees
- Group of Farmers/Growers
- NGOs
- Agro-Processing Corporations
- Self Help Groups
- Marketing Boards
Quantum of Loan :
Loans of up to 80% of the project cost can be availed as loan amount. Currently, warehouse loans are offered anywhere between Rs. 1 Lakh to Rs. 20 Crores.
Rate of Interest :
The prevailing interest rate ranges between 10.5% - 11.5%.
Repayment tenure :
Available repayment tenures are between 7 years to 11 years depending on the bank.
Salient features of a few loan products for warehouse
NABARD –
The bank has been exclusively appointed by the Indian Government in regulating the warehouse infrastructure across the country. Allocations up to Rs. 5000 crores were made in the budgets of 2013-14 and 2014-15 towards financing public and private sectors for construction of warehouses, cold storage and other storage infrastructure.
- Loans will be provided for creation of storage infrastructure with a minimum aggregate capacity of 5000 metric tonnes for agricultural and allied products
- Storage facilities refer to warehouses, silos, cold storage and controlled atmosphere stores
- Loans can be availed for improvement or modernization of existing facilities with due merit
- It offers repayment tenures of 7 years or more
- For repayment period less than 7 years, the interest rate would be prime lending rate of NABARD + Risk premium. For repayments more than 7 years, interest rate would be calculated as prime lending rate of NABARD + risk premium + tenure premium.
- Loans will be provided only to those facilities that conform to the guidelines laid down by the Warehouse Development and Regulatory Authority (WDRA) or National Centre for Cold chain Development (NCCD).
- State Governments and state-owned corporations can avail loans at a concessional rate of 1.5% less than the prevailing rate. They are also given a loan of up to 95% of the project cost.
State Bank of India – Gramin Bhandaran Yojna
This is a capital investment subsidy scheme for construction or renovation of rural godowns. This scheme aims at modernizing and creating scientific storage capacity in the rural to store farm produce so that farmers are not forced to distress sell their produce.
- The facility is to be constructed or located in an area marked as rural or is outside of any municipal corporation limits
- Can also be availed by rural godowns located inside food parks promoted by the Ministry of Food Processing Industries
- Loan quantum of Rs.3000 – Rs.4000 per tonne for new construction and Rs.750 per tonne for renovation
- Loan regulated by NABARD and offers up to 75% of the project cost
- Mortgage/security of the land and godown is mandated
- Repayment tenure of 11 years with a grace period of 1 year
IDBI Bank
This loan is offered to individual farmers, public & private limited companies, dealers, traders and APMCs.
- It can be used for construction of warehouses, market yards, godowns and silos
- Cold storage units used to storage agriculture produce and products, irrespective of the location
- Loan quantum of Rs. 1 lakh to Rs. 20 crores
- Repayment tenure not to exceed 9 years including a moratorium period of 2 years
Bank of India
The loan can be used to construct cold storage chambers along with concrete racks and staircases
- It can be utilized for installation of machineries and plant required for the running of the cold storage unit
- Loan quantum of up to 85% of the project cost is offered
- Repayment tenure of up to 9 years with a grace period of 1 year
- Requires complete insurance of the assets purchased with the bank loan
FAQs: Loans for Warehouse
1. I am not a farmer. Can I avail a warehouse loan?
A warehouse loan is not limited to farmers. Any individual, corporation or a company can apply for this loan.
2. Should the warehouse be constructed only in a rural area?
The purpose of a warehouse loan is to facilitate farm produce storage, which happens in rural areas. Hence, warehouse loans are offered for warehouses constructed in rural areas. However, there are other loan products available with banks for construction of warehouses of different purposes.
3. What is the prevailing interest rate for warehouse loans?
Warehouse loans are regulated by NABARD and usually have lower interest rates compared to other types of loans. The current rate of interest on this loan type varies between 10.5- 11.5%.
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