NEW DELHI: The Reserve Bank of India (RBI) on Friday rationalised the risk-weight norms and linked them to loan-to-value (LTV) ratios only for all new housing loans sanctioned up to March 31, 2022. The move, experts say, may provide some impetus to the real estate sector as it will allow banks to lend more for high-value properties, without worrying much about a higher capital charge.
“Recognising the criticality of real estate sector in the economic recovery, given its role in employment generation and the interlinkages with other industries, it has been decided, as a countercyclical measure, to rationalise the risk weights by linking them only with LTV ratios for all new housing loans sanctioned up to March 31, 2022,” the RBI said. Before the change is implemented, the risk weights are linked to size of the loan as well as the LTV ratio.
“This announcement will definitely encourage banks to lend more to individual homebuyers without feeling the stress on their balance sheets,” said Anuj Puri, Chairman - ANAROCK Property Consultants. He added that reduced repo rates, however, would have given an added boost just before the upcoming festive season. The central bank also broadened the ‘co-origination model’ allowing non-bank lenders including housing finance companies to collaborate with banks to undertake priority sector lending.
According to Anshuman Magazine, Chairman & CEO - CBRE India, the review of the co-origination model between banks and NBFCs and extended the scheme to all NBFCs (and banks) will improve the flow of credit in the economy. Satish Magar, President, CREDAI National, said the move to extend the co-lending scheme to NBFCs & HFCs may infuse additional liquidity; however, the strict due diligence norms and eligibility criteria may not benefit the realty sector. Magar added now that RBI has recognised the realty sector as the largest employer, it should also announce steps that are imperative and crucial for the sector’s mere survival.