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Home loans up to Rs 50 lakh to get cheaper

July 17, 2014 16:14 IST

Following the Budget, the Reserve Bank has paved the path for increasing the liquidity for banks, enabling several positive steps in the real estate sector.

Impact on home buyers

RBI notified to consider the home loan up to Rs 50 lakh (i.e. a property value up to 65 lakh) in metropolitan city and Rs 40 lakh (i.e. a property value up to Rs 50 lakh) in all other locations to be considered as affordable housing.

To create liquidity for providing such loans, now banks can issue infrastructure bonds up to 7 years tenure.

Such bonds will not be subject to any Cash reserve Ratio (CRR) or Statutory liquidity ratio (SLR) requirement.

This decision by the RBI will provide ample liquidity to the banks for providing home loans to the newly defined affordable home segment.

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Home loans up to Rs 50 lakh to get cheaper

July 17, 2014 16:14 IST

Most of the affordable segment customers are also first time home buyers and therefore find sourcing from home loan becomes very important to them to manage the deficit.

RBI’s step will turn the developer’s focus more on the affordable home segment and it will improve the supply of affordable homes.

This is expected to create more and better choices for home purchase. RBI would also regularly review the affordable home definition to counter the inflation effect.

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Home loans up to Rs 50 lakh to get cheaper

July 17, 2014 16:14 IST

Impact on home loan rates

After the RBI’s announcement about several measures in favour of the affordable home segment, the interest rate on home loan for affordable home would shrink close to base lending rate.

Already some leading banks are offering a home loan closer to base rate for affordable homes.

Prevailing home loan interest rate for affordable home is around 10 to 11 per cent but now there is chance of rate cut by the banks, which are lending at around 11 per cent interest rate.

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Home loans up to Rs 50 lakh to get cheaper

July 17, 2014 16:14 IST

The infrastructure bonds to be issued by banks for funding the affordable homes will be eligible to get exemption while calculating the priority sector lending.

Therefore, sufficient fund will be available to the banks for funding the affordable home segment and it would also start a competition among the banks to attract new customers by rate cuts, discount in processing charges and other attractive offers.

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Home loans up to Rs 50 lakh to get cheaper

July 17, 2014 16:14 IST

Impact on home loan process

The process of procuring a home loan will become easier with a healthy competition among the banks to attract new customers for the affordable home segment.

Affordable home segment consists of large number of first time home buyers who would welcome an easy understanding of the home loan process and aspects that would facilitate quick and easy home loan disbursals.

With the backing of the initiative taken by the RBI, the business in affordable home segment will increase and it will help banks create more leniency and ease of the home loan process in terms of eligibility norms, documentation etc.

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