AgenciesThe Reserve Bank of India’s decision to rationalize the risk weights on home loans and link them to Loan-to-Value (LTV) ratio is expected to bolster the real estate sector with higher lending, property developers said.
Until now, the risk was linked to both size of the home loan and loan to value and the move to link it to only the latter is likely to help lenders on the capital adequacy front enabling them to provide more loans.
“The decision to rationalise the risk weights on home loans and link them to Loan to value ratios only will give a boost to the real estate sector. Particularly this step would benefit borrowers of higher value loans. It would ensure that more credit is available to borrowers,” said Niranjan Hiranandani, President (National) NAREDCO. “This move is a much appreciated step recognising the role of the real estate sector in generating employment and economic activity.”
The decision, according to property developers, has come at the right time and will help projects in all segments and price points.
“The rationalizing of risk weightage on home loans is a targeted intervention and comes at a time when the property sector is making a significant recovery across all the segments. The measure would provide a boost to the ongoing projects and inventory pick up for luxury developers. The homebuyers across all price-points will be able to access more capital with ease,” said Kamal Khetan, CMD, Sunteck Realty.
LTV indicates the proportionate value of the property a bank can lend as a home loan to a borrower. The bank is expected to make more provisions when the risk weight is higher, and this restricts the loan value.
In its bi-monthly monetary meet, the central bank has decided to keep the repo rate unchanged. The repo rate and reverse rate remain at 4 per cent and 3.35 per cent, respectively, after the announcement.
Since February 2019, the RBI’s monetary policy committee has cut the repo rate by 250 basis points.
Until now, the risk was linked to both size of the home loan and loan to value and the move to link it to only the latter is likely to help lenders on the capital adequacy front enabling them to provide more loans.
“The decision to rationalise the risk weights on home loans and link them to Loan to value ratios only will give a boost to the real estate sector. Particularly this step would benefit borrowers of higher value loans. It would ensure that more credit is available to borrowers,” said Niranjan Hiranandani, President (National) NAREDCO. “This move is a much appreciated step recognising the role of the real estate sector in generating employment and economic activity.”
The decision, according to property developers, has come at the right time and will help projects in all segments and price points.
“The rationalizing of risk weightage on home loans is a targeted intervention and comes at a time when the property sector is making a significant recovery across all the segments. The measure would provide a boost to the ongoing projects and inventory pick up for luxury developers. The homebuyers across all price-points will be able to access more capital with ease,” said Kamal Khetan, CMD, Sunteck Realty.
LTV indicates the proportionate value of the property a bank can lend as a home loan to a borrower. The bank is expected to make more provisions when the risk weight is higher, and this restricts the loan value.
In its bi-monthly monetary meet, the central bank has decided to keep the repo rate unchanged. The repo rate and reverse rate remain at 4 per cent and 3.35 per cent, respectively, after the announcement.
Since February 2019, the RBI’s monetary policy committee has cut the repo rate by 250 basis points.
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