Home loans to be cheaper, thanks to RBI
The RBI has said that in addition to small value loans, home loans to individuals up to Rs 50 lakh (for houses of value up to Rs 65 lakh) in metros and loans up to Rs 40 lakh (home value Rs 50 lakh) in other centres will be considered as affordable housin
Home loan seekers will soon find themselves being increasingly wooed by banks, and affordable housing projects could get cheaper with the Reserve Bank of India (RBI) announcing a raft of measures that encourages bank lending to these segment.
The RBI has said that in addition to small value loans, home loans to individuals up to Rs 50 lakh (for houses of value up to Rs 65 lakh) in metros and loans up to Rs 40 lakh (home value Rs 50 lakh) in other centres will be considered as affordable housing. Extending these loans will entitle banks to float infrastructure bonds up to seven years. Money raised under these bonds will not be subject to reserve requirements such as cash reserve ratio (CRR) and statutory liquidity ratio (SLR). Eligible bonds will also get exemption in calculating priority sector lending targets.
Bankers said that they were preparing for a pick-up in home loans in light of the increase in tax breaks from Rs 1.5 lakh to Rs 2 lakh. The finance minister in the Budget had said that banks would be allowed to float long-term bonds for lending to infrastructure. Explaining the rationale to extend this facility for housing, the RBI said “Apart from what is technically defined as infrastructure, affordable housing is another segment of the economy which both requires long-term funding and is of critical importance.
Accordingly, the Reserve Bank intends to ease the way for banks to raise long- term resources to finance their long term loans to infrastructure as well as affordable housing. This will help promote both growth and stability, as well as improve the supply side.”
The RBI said that granting the exemptions will mitigate the asset-liability management (ALM) problems faced by banks in extending project loans to infrastructure and core industries sectors. “A collateral benefit if bank bond issuances prove successful is the development of the domestic corporate bond market,” the RBI said.