Developers hail RBI’s move to lower risk weightage on house loans

RBI decided to rationalise the risk weights by linking them only with LTV (Loan to Value) ratios for all new housing loans sanctioned up to March 31, 2022

New Delhi: Real estate developers on Friday welcomed the RBI’s decision to lower risk weightage on housing loans, saying it would boost credit flow to the sector, but demanded that more steps should be taken to revive the industry. The RBI decided to rationalise the risk weights by linking them only with LTV (Loan to Value) ratios for all new housing loans sanctioned up to March 31, 2022. With lowering of risk weightage, the requirement of capital provision for banks will come down.

Commenting on the monetary policy, CREDAI National President Satish Magar said linking of housing loans to LTV would boost housing demand. The move to extend co-lending scheme to non-banking financial companies (NBFCs) and housing finance companies (HFCs) may infuse additional liquidity, he said, but added that realty sector might not get benefit due to strict due diligence norms and eligibility criteria.

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“Now that RBI has recognised realty sector as the largest employer, it should also announce steps that are imperative and crucial for the sector’s survival and then introduce measures that will aid the sector’s revival,” Magar said. He sought that all loan accounts that were SMA 1 & SMA 2 as on March 1, 2020 should be made eligible for restructuring. Naredco president Niranjan Hiranandani said the RBI’s decision to rationalise the risk weights on home loans and link them to LTV ratios will give a boost to the sector.

“Particularly this step would benefit borrowers of higher value loans. It would ensure that more credit is available to borrowers. This move is a much appreciated step recognising the role of the real estate sector in generating employment and economic activity,” he added.

Anshuman Magazine, chairman & CEO – CBRE India, South East Asia, Middle East & Africa, said, “RBI’s decisions to relax LTV guidelines and rationalise risk weights for home loans will further encourage homebuyers.” Anarock Chairman Anuj Puri said the announcement will definitely encourage banks to lend more to individual homebuyers without feeling the stress on their balance sheets.

JLL India CEO and Country Head Ramesh Nair termed the move as timely and a step in the right direction and said this would provide a fillip to housing loans and have a positive impact on the residential sector. The RBI has extended the scheme for co-lending to all NBFCs and HFCs which will ease credit availability for the real estate sector, he added.