A major shot in the arm for real estate companies and the low-cost housing sector. The RBI has relaxed the loan to value or LTV norms for houses under Rs 10 lakh.
Banks will be allowed to add stamp duty, registration and other documentation charges to the cost of the house while calculating the loan to value ratio. Earlier banks were advised not to include these charges in the cost of the property.
However, RBI now acknowledges that these charges make up for almost 15 percent of the cost of the house in many cases and can place a burden on the borrowers from economically weaker sections.
In another major move, and one that will help buyers pick up government housing projects, the central bank has decided to allow banks to delink disbursal of the loan amount from the stage of construction the housing project is in. However this relief is applicable only to government housing projects.
Rohit Raj Modi, President - NCR CREDAI, said, "This is a welcome step towards low cost housing as the RBI circular states clearly it applies for all those housing units which are below 10 lakh."
Below is the verbatim transcript of the interview with CNBC-TV18's Nayantara Rai.
Q: The changes announced by the Reserve Bank of India (RBI) today. How important are they, can they actually help credit off tick when we look at low cost housing?
A: Definitely a welcome step towards low cost housing because as the RBI circular states clearly it applies for all those housing units which are below 10 lakh wherein RBI has permitted the inclusion of stamp duty registration cost and legal charges to be considered by the scheduled and nationalised banks while considering the loan to value which earlier it had advised them not to consider through its 2012 circular. So it is a positive step towards encouraging low cost housing.
Q: Do you perhaps see this as a precursor to something we find in the housing for all by 2022, a mission which was not announced or talked about in detail in the Budget but which the government still has to come out with. Do you think this is a precursor to that?
A: I would like to think so because these are small steps which would require rhyming out for a very effective housing for all policy. So I would like to think that these are baby steps being taken towards that direction.