RBI caps home loan at 80%
Dec. 23: Concer-ned over excessive flow of banking funds to the real estate sector, the Reserve Bank on Thursday said that lenders will provide loans only up to 80 per cent of the cost of property. Following the RBI directive, a home buyer will necessarily have to arrange for at least 20 per cent of the property value on his own before seeking a loan from a bank.
In order to check speculation in the real estate sector, the central bank has made it tougher for banks to provide high value loans for properties costing more than `75 lakh, besides raising the provision requirement for loans provided at ‘teaser rates’. “In order to prevent excessive leveraging, the LTV (Loan to Value) ratio in respect of housing loan hereafter should not exceed 80 per cent”, the Reserve Bank said in a notification.
However, in case of small value housing loans up to `20 lakh, banks can provide loans up to 90 per cent of the property value, the central banks said, adding such loans are part of priority sector advances.
In absence of any LTV norms, banks have been providing liberal loans for buying homes, going up to 90 per cent of the asset value. In order to curb the practice of alluring home buyers by offering cheaper rates for limited period, RBI raised the provisioning requirement for banks for teaser rates from 0.4 per cent to 2 per cent with immediate effect.
Under the revised norms, the banks will have to set aside more capital as provision against home loans given at teaser rates. Some banks including ICICI Bank, HDFC has already withdrawn their teaser rates scheme while SBI’s scheme would continue till this month.
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