Affordable Housing is now ‘Really Affordable for Banks’
Affordable Housing – Is it now really Affordable for Banks?
In what may be termed a reasonably path-breaking move, the Reserve Bank of India (RBI) has announced a series of measures that would give a boost to the Banks to increase their exposure in this segment. So as India mortgage specialists and housing finance consultants, our eyes really popped out. Let us see what RBI has said,
- Small value loans will be considered affordable housing. (Oh Yes! We knew that already)
- But in addition, loans to individuals upto ₹ 5 Mn in metros and loans to individuals upto ₹ 4 Mn in other cities will be considered affordable housing. Yes, this is new. But for this, there is a rider on the property value. The property value in Metros should not be more than ₹ 6.5 Mn and in other centres the property value should not be more than ₹ 5 Mn.
So what if these loans are termed as ‘Affordable Housing?’ RBI has said that Banks that extend these types of loans will be able to float infrastructure bonds for a tenure of upto 7 years. Plus, for the money that the Banks raise through these bonds, they will not be required to maintain CRRs and SLRs. And then, such bonds can also get exemption in calculating the priority sector lending targets for the Banks.
So much? Then it is a big enough deal. If you are a home loan seeker, you might soon find yourself increasingly accosted by Banks for availing home loans from them. So this news is great news for the customers, for the economy and for the banks. A win-win. About time, we saw one.
The Banks had already been preparing themselves to face the increase in business that is likely to result on account of enhancement of tax benefits for home loan customers. With this push for affordable housing business is likely to grow.
This move will also help developers who operate in the affordable segment. Banks once they raise funds through infrastructure bonds, would be able to provide construction finance to developers.
Fabulous then. Affordable Houses are around.
Are you a Bank or an HFC or an NBFC and looking to evaluate a developer for construction finance?
Are you an individual looking to choose / identify an affordable home and also a home loan?