RBI Governor on Friday made key announcements in regards to individual housing loans. RBI has linked individual housing loans to Loan To Value (LTV) ratio.

By Varun Singh

Looking to buy a home availing a housing loan then read this minutely. RBI has linked individual housing loans to Loan To Value (LTV) ratio.

On Friday, RBI Governor, Shaktikanta Das made several key announcements while speaking on the Monetary Policy.

RBI, as expected, has kept both the repo rate and reverse repo rates unchanged at 4% and 3.35% respectively.

For individual homebuyers, there’s a big announcement that the governor made.

RBI announced Rationalisation of Risk Weights on Individual Housing Loans.

The Governor said, “Under the extant regulations, differential risk weights are applicable to individual housing loans, based on the size of the loan as well as the loan-to-value ratio (LTV).”

The Governor further added, “In recognition of the role of the real estate sector in generating employment and economic activity, it has been decided to rationalise the risk weights and link them to LTV ratios only for all new housing loans sanctioned up to March 31, 2022.”

“This measure is expected to give a fillip to the real estate sector.”

Shaktikanta Das, Governor 

Experts on the matter claim this announcement will encourage banks to lend more to individual homebuyers without feeling the stress on their balance sheets.

Anuj Puri, Chairman, Anarock Property Consultants said, “On a positive note, RBI’s move to rationalize risk weightage on home loans and linking housing loans risks only to loan-to-value is a welcome move. In the current challenging times, banks have been reluctant to lend owing to risks amidst the pandemic while buyers have remained financially stressed.”

On the linking of housing loans to LTV Dr Niranjan Hiranandani, President (National) NAREDCO and Assocham said, “Particularly this step would benefit borrowers of higher value loans. It would ensure that more credit is available to borrowers.”

Decision to rejig home loan rules will provide boost to the real estate sector.”

Dr Niranjan Hiranandani, President (National) NAREDCO and Assocham.

Not just luxury, even affordable and mid income housing will also benefit from the announcement.

“RBI’s stand to rationalize risk weightage on home loans is a step in the right direction. Homebuyers in the affordable, mid-income and upper middle-income housing segment will benefit immensely from this move.” Ankush kaul, President (Sales & Marketing) – Ambience Group.

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