Housing loans of up to Rs 50 lakh could become cheaper with the Reserve Bank of India relaxing the rules for banks to offer loans for the sector.
Taking forward the announcement made in Budget 2014-15 to encourage infrastructure investment, RBI has permitted banks to raise long-term soft funds from the market to finance such loans.
The loans will, however, not be applicable to builders. An RBI circular, issued on Tuesday, noted, “housing loans to individuals up to Rs 50 lakh for houses of values up to Rs 65 lakh” in the six metropolitan centres will get the concession. In other cities the upper limit will be Rs 40 lakh for houses of values up to Rs 50 lakh. It added that “RBI will periodically review the definition of affordable housing on account of inflation”.
Banks had been resisting giving out large and long-term loans for infrastructure sectors including housing as they do not raise long-term finance. The RBI circular has now permitted the banks to raise such funds without being hobbled by restrictive conditions like fulfillment of investing part of the money so raised in safe government securities.
The banks can lend the money to people who walk in for home loans into their banks at attractive rates from now. The BJP manifesto promised low cost housing to all by 2022.
The RBI has made it clear that its regulatory forbearance “will be restricted to the bonds that are used to incrementally finance long-term projects in infrastructure and loans for affordable housing”.
The shortage of houses in urban India is estimated at close to 19 million as per National Housing Bank data. Another estimate says that it takes more than five year’s annual income to pay for a house in the non-metro cities. Thus, the available housing stock is priced mostly out of reach for even middle income housing groups.
The RBI circular says that those in the lowest income bracket, who are entitled to priority sector lending, will continue to get the support from the government and the banking sector, unchanged. Navin Raheja, chairman of Credai, the apex association of realtors, said, “Giving affordable housing infrastructure status will boast the housing sector in India. This will help developers to mobilise cheaper finance for development of affordable housing and will result into cutting in prices of housing in long term”.
The RBI notification states that the seven-year bonds to be raised