RBI boosts low-priced housing: Cuts risk weight, ups loan amt

In an effort to provide boost to affordable housing, the Reserve Bank of India on Thursday made a decision to allow banks to lend upto 90% of property cost upto Rs 3 million. In July 2014, RBI had made home loans up to Rs 50 lakh in metros and Rs 40 lakh in non-metros, given by banks from the proceeds of long-term bonds (of minimum seven years maturity) qualified as affordable housing loans. If the loan exceeds Rs 30 lakh it will range from 75-80 per cent, ” a senior banker told The Telegraph.

“At present, the minimum risk weight applicable on individual housing loans is 50 per cent. To improve affordability of low-cost housing for economically weaker sections and low-income groups and give a fillip to “housing for all”, while being cognisant of prudential concerns, it is proposed to reduce the risk weights applicable to lower value but well collateralised individual housing loans”, the central bank had said. The S&P BSE Realty index moved up 1.2% in early morning trade.

Vibha Batra, VP at ICRA, said, “Lowering risk weights (further from 50 per cent) in the affordable housing segment that is yet to be credit tested, the asset quality is likely to be more vulnerable and volatile and could translate into thin capital cushion to cover the unexpected losses”.

He hopes that sales will rise in smaller cities where apartments are available at below Rs 30 lakh.

It has also modified the provisioning or risk-weights norms for home loans. As per the new circular, the risk weight for loans of up to Rs 30 lakh, where a buyer avails of loans between 80-90 per cent of the property value shall be 50 per cent, while that for loans where buyer avails of loan up to or equal to 80 per cent shall be 35 per cent.

Sanjay Dutt, managing director, Cushman and Wakefieldm, said, “Lower risk weight on housing loans from the current 50 per cent would enable banks to free more funds to lend for low-cost housing”. All real estate companies need to revise their prices so that banks can get a leg-up to disburse the loan to home seekers.

The move now is the last in a series of measures the RBI has initiated to boost the affordable housing sector.

It has been observed that a few lenders have been seeking relaxations from the central bank in light of a slowdown in the real estate sector.

Teaser home loans are offered at a fixed low-rate of interest in the initial years and are subsequently adjusted to a higher floating rate for the rest of their tenure.