RBI eases loan-to-value norms for housing loans below Rs 1 mln

The Reserve Bank of India eased norms for housing loans of less than 1 mln rupees, allowing banks to include stamp duty, registration and other documentation charges to the cost of the house for the purpose of calculating the loan-tovalue ratio.

The central bank said it was easing norms as the aforementioned charges could be as much as 15% of the cost of a house, becoming a burden on borrowers from economically weaker sections and low income groups. As such, the review of the norms is expected to encourage availability of affordable housing to such borrowers.

The revised norms come at a time when the Narendra Modi-led National Democratic Alliance government has pledged to provide housing for all by 2022, which would require about 110 mln housing units.

Modi had attended the bankers' retreat "Gyan Sangam" in early January, and had asked bankers to make use of the opportunity that would be presented by the housing sector in the coming years.

The RBI also said that for housing projects sponsored by the government or statutory authorities, banks could give loans according to the payment stages prescribed by the said authorities, "even where payments sought from house buyers are not linked to the stages of construction".

Previously, housing loan disbursals to individuals had to be closely linked to the stages of construction of the housing project, with upfront disbursal not permitted in cases of incomplete or under-construction housing projects.

The RBI said it was easing the norms as banks had said that they were unable to give loans in case of projects sponsored by government bodies as these projects' payment schedule was not linked to the stages of construction. -Cogencis