In a move to make home loans cheaper, the Reserve Bank of India (RBI) on Friday announced that it will rationalise the risk weights and link them to loan-to-value (LTV) ratios for new home loans till March 31, 2023. While announcing the decision, RBI governor Shaktikanta Das said, “The risk weights for individual housing loans were rationalised in October 2020 by linking them only with loan to value (LTV) ratios for all new housing loans sanctioned up to March 31, 2022. Recognising the importance of the housing sector and its multiplier effects, it has been decided to extend the applicability of these guidelines till March 31, 2023."
Commenting on this rule, Ram Raheja, director at S Raheja Realty, “For the real estate sector, the pandemic followed by the current global political crisis has been a silver lining. Being a tangible asset and safe haven investment, people continue to invest in real estate."
“As home loans are likely to remain cheaper, residential real estate will witness a further impetus. Overall uncertainty is leading people to return to focus on basic requirements like spacious living spaces. With a timeline for loan-to-value rules to be relaxed until March 2023, it will incentivise homebuyers to take the plunge, leading to a further rise in demand," he further added.
The loan-to-value (LTV) ratio is the financial ratio that compares the size of a loan that customers will borrow to the value of the asset the customer will purchase. Usually, the lenders use LTVs to determine how risky a loan is and whether they will approve or deny it.
Repo Rate Unchanged: What it Means for Home Loan Borrowers
Reserve Bank of India kept key lending rates — repo rate unchanged in the first meeting of Monetary Policy Committee (MPC) for the financial year 2022-23. The repo rate remained at 4 per cent. So home loan borrowers who pay easy monthly installment at a flexible interest rate, will continue paying the same rate of interest as applicable now.
“From a real estate perspective, the unchanged repo rate will continue to provide elbowroom to homebuyers, since home loan rates are at a record low. The housing sector saw a revival in 2021 and the continued low home loan rates can further propel homebuyers’ sentiments," said Ramesh Nair, CEO, India and Managing Director, market development, Asia, Colliers.
“Homebuyers have a continued opportunity to avail of decadal low home loan interest rates. The overall cost of living has increased significantly since the Ukraine debacle began playing out, and the RBI has taken a proactive and necessary step to maintain relative housing affordability in the country," said Anuj Puri, chairman - ANAROCK Group.