National Housing Bank (NHB) has increased provisions on standard assets from 0.1% to 0.4% on retail home loans given by housing finance companies.
The reasons for NHBs move are significant. In the light of increasing inflationary pressure leading to high property prices and increase in interest rates, the demand of borrowers for a home loan have decreased considerably. With the inventory of housing projects piling up, the builders are also getting affected.
Although this news has come in to light, it is still not clear as to when exactly this norm would be effective. As of now, provisions for non retail loans like developers, loan against property and top-up loans is 0.40%.
When asked if NHB would be looking at reviewing in benchmark rate at which it provides cheaper finance to housing finance companies he said that there is no immediate plans to increase rates now.