RBI steps to push up home loan rates
More Provisioning For Teaser Rates * Higher Risk Weightage For Over . 75L Loans * TIMES NEWS NETWORK Mumbai: You may have to to cough up more as down payment for that dream home. The Reserve Bank of India (RBI) on Thursday tweaked some of the rules that govern home loans and one of the changes, first announced in RBI’s policy meeting on November 2, make it compulsory for all those applying for a housing loan from a bank to pay a margin money of at least 20% of the value of the property. Earlier, this margin money varied between 10% and 15 %. However, the central bank has made a small concession for housing loans up to Rs 20 lakh where a buyer will be allowed to get a home loan by paying at least 10% of the value of the property. The RBI also addressed the contentious issue of teaser rates in home loans and increased provisioning norms for all loans given at concessional rates for the first few years and has the option to go up after the initial few years. But even on this count, it made some concessions saying that once the concession period ends and the borrower moves to the regular rate structure, provisioning for banks could come down. “At present, there is no regulatory ceiling on the LTV (loan-to-value) ratio in respect of banks’ housing loan exposures. In order to prevent excessive leveraging, the LTV ratio in respect of housing loans hereafter should not exceed 80%,” RBI said in a notification. “However, for small value housing loans, i.e. housing loans up to Rs 20 lakh (which get categorized as priority sector advances), it has been decided that the LTV ratio should not exceed 90%,” the notification added. The central bank also increased the risk weightage of loans above Rs 75 lakh taken for buying a property, which could increase the interest rates on loans for high-cost properties. This is being seen as a pre-emptive measure to rein in the possibility of an asset bubble and a sign that there could be overheating in the property market. On the teaser rates in the home loan market, the central bank said this practice raises concern as some borrowers may find it difficult to service the loans once the normal interest rate, which is higher than the rate applicable in the initial years, becomes effective. The RBI further said that many banks at the time of initial loan appraisal, do not take into account the repaying capacity of the borrower at normal lending rates. “Therefore, in view of the higher risk associated with such loans, the standard asset provisioning on the outstanding amount has been increased from 0.40% to 2% with immediate effect. The provisioning on these assets would revert to 0.40% after one year from the date on which the rates are reset at higher rates if the accounts remain ‘standard’,” the notification said. * NEED TO SHELL OUT MORE * • Home buyers now must pay a margin money of at least 20% of the value of the property • For loans up to Rs 20 lakh, a buyer will be allowed to get loan by paying at least 10% of the value of the property -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
