There may still be some cheer for prospective home buyers in the Metros as the Central Bank’s policy released on Wednesday makes it easier for them to avail home loans in the affordable housing segment.
For the first time since January 2014, RBI hiked the repo rate and reverse repo rate by 25 bps to reach 6.25% and 6% respectively.
In order to bring greater convergence of the Priority Sector Lending (PSL) guidelines for housing loans with the Affordable Housing Scheme, and to give a fillip to the low-cost housing for the Economically Weaker Sections and Lower Income Groups, it has been decided to revise the housing loan limits for PSL eligibility from existing ₹28 lakh to ₹35 lakh in metropolitan centres (with population of ten lakh and above), and from existing ₹20 lakh to ₹25 lakh in other centres, provided the overall cost of the dwelling unit in the metropolitan centre and at other centres does not exceed ₹45 lakh and ₹30 lakh, respectively. A circular in this regard shall be issued by June 30, 2018, said RBI in a statement.
“As per the new policy, home loans up to Rs 35 lakh in metros will now qualify for benefits under priority sector lending. Earlier, only housing loans up to Rs 28 lakh were eligible for these benefits. This is a big boost for the first-time home buyers in metros who are looking to buy properties in the affordable segment. Besides getting subsidy benefits of Rs 2.68 lakh from the central government (under schemes like Pradhan Mantri Awas Yojna), owning a house in the metros will soon become a reality for many,” says Anuj Puri, Chairman - ANAROCK Property Consultants.
It is a mature and calibrated approach by Monetary Policy Committee to hike policy rates by 25 bps while maintaining a neutral stance during a volatile period. This indicates RBI will remain vigilant on retail price levels in the coming months.
Amongst the reforms announced, an important announcement was made regarding home loans up to Rs 35 lakh being considered as priority sector lending. This would give a boost to affordable housing real estate sector and help in economic growth, says Khushru Jijina, MD, Piramal Finance & Piramal Housing Finance.
Gagan Randev, National Director, Capital Markets & Investment Services at Colliers International India, says "This convergence would be beneficial to both potential home buyers and builders catering to this segment. The number of options available currently for availing loans under the PMAY were severely restricted since very few options are available at the current price point. The enhanced limits would bring a lot many more options to potential buyers. The enhancement in housing loan limits would also lead to many more buyers and make these fall in the realm of affordability. It would also lead to many more developers looking at catering to this segment."
The RBI increased the repo rate by 25 basis points for the first time since January 2014 amidst high inflation concerns in the economy. At the same time, some commercial banks have already raised their MCLR (marginal cost of funds based lending rate) recently, which might lead to higher home loan interest over the next few months. “We foresee an increase in home loan rates not to have a significant impact on sales velocity in the residential market. Serious buyers, especially in an end-user driven market, will continue to scout the market for properties, as the change in actual EMI will not be significant, post an upward revision in home loan rates,” says Anshul Jain, Managing Director, Cushman & Wakefield India.
“The Real Estate Industry was expecting a reduction in Repo rate by RBI. This decision to hike the Repo rate by 25 basis points may lead to suppressed growth in the Indian real estate sector which has shown substantial resilience over the last 18 months. We hope that this move will not have any negative implications for the beneficiaries under PMAY in the form of increased borrowing costs. Indian realty requires lower rates to provide further thrust to ‘Housing for all by 2022’ which will also enable the sector to spearhead the growth of the Indian economy,” says Jaxay Shah, President, CREDAI National.
The apex Bank may also tighten norms in low-ticket affordable loan segment by increasing loan to value ratio and increasing risk weight to address rising bad loans in less than Rs 2 lakh ticket size.
“After a careful analysis of the Housing Loans data, it has been observed that the level of NPAs for the ticket size of up to Rs 2 lakh has been high and is rising briskly, the apex bank said in its statement, adding “Banks need to strengthen their screening and follow up in respect of lending to this segment.”
Some HFCs focusing on the affordable housing segment have shown an above-average increase in delinquencies with gross NPA at 4-5%.