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Risk weightage on housing loans rationalised | RBI move to boost demand for real estate

The measure will boost affordable, mid and luxury housing and spur demand in Tier I and select Tier II cities

In an attempt to spur housing demand, the Reserve Bank of India (RBI) on October 9 decided to rationalise risk weightage on housing loans, making them attractive for both borrowers and lenders.

With this revision, the capital provision requirement for banks will reduce and they will be encouraged to push retail loans, benefiting all housing segments, including the mid and luxury segments.

The move is expected to improve demand in Tier I cities and select Tier II cities where the average price of a housing unit is over a crore.

"Recognising the criticality of the real estate sector in the economic recovery, given its role in employment generation and the inter-linkages with other industries, it has been decided to rationalise the risk weights by linking them only with loan-to-value (LTV) ratio for all new housing loans sanctioned up to March 31, 2022," RBI Governor Shaktikanta Das said.