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

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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.

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