RBI announces steps to boost credit flow to real estate sector
The Reserve Bank rationalized the risk weightage to LTV (loan to value) ratio for all new housing loans sanctioned up to March 31, 2022, on October 16.
According to the RBI notification, new housing loans will attract a risk weight of 35 percent where LTV is less than 80 percent and risk weight of 50 percent where LTV is more than 80 percent but less than 90 percent.
As per RBI, this will give a fillip to bank lending to the real estate sector which is critical for economic recovery. It will further give an employment generation and the interlinkages with other industries.
“As a countercyclical measure, it has been decided to rationalize the risk weights, irrespective of the amount. The risk weights for all new housing loans to be sanctioned on or after the date of this circular and up to March 31, 2022,” the notification said.
According to the notification, the requirement of a standard asset provision of 0.25 percent will continue to apply on all such loans, the added.
Anarock Chairman Anuj Puri stated that the LTV ratio is calculated by dividing the amount borrowed by the value of the property in percentage terms. Furthermore, one purchase a home valued at Rs 80 lakh, and for this makes a down payment of Rs 10 lakh, Rs 70 lakh will need to be borrowed.
He also said that the risk weightage assigned to LTV will free up banks’ capital for additional lending. It will also help them to bring down the lending rates because they will have spare capital to lend,” Puri said. Since banks will have additional capital to lend, getting home loans at attractive interest rates will be possible.
