In just a few days following the budget RBI has paved the path for increasing the liquidity for banks, enabling the possibility of a lot of positive steps in the real estate sector.
Impact on home buyers
RBI notified to consider the home loan up to Rs 50 Lac (i.e. a property value up to 65 Lac) in metropolitan city and Rs 40 Lac (i.e. a property value up to 50 Lac) in all other locations to be considered as affordable housing. To create liquidity for providing such loans, now banks can issue infrastructure bonds up to 7 years tenure. Such bonds will not be subject to any CRR or SLR requirement. This decision by the RBI will provide ample liquidity to the banks for providing home loans to the newly defined affordable home segment. Most of the affordable segment customers are also first time home buyers and therefore fund sourcing from home loan becomes very important to them to manage the deficit. RBI’s step will turn the developer’s focus more on the affordable home segment and it will improve the supply of affordable homes. This is expected to create more and better choices for home purchase. RBI would also regularly review the affordable home definition to counter the inflation effect.
Impact on home loan rates
After the RBI’s announcement about several measures in favour of the affordable home segment, the interest rate on home loan for affordable homes could be more close to the base lending rate. Already some leading banks are offering a home loan closer to base rate for affordable homes. Prevailing home loan interest rate for affordable home is around 10 to 11% but now there is chance of rate cut by the banks which are lending around 11% interest rate. The infrastructure bonds to be issued by banks for funding the affordable homes will be eligible to get exemption while accounting for the priority sector lending. Therefore, sufficient funds will be available to the banks for funding the affordable home segment. This will also encourage banks to attract new customers by rate cuts, discount in processing charges and other attractive offers.
Impact on home loan process
The process of procuring a home loan will become easier with a healthy competition among the banks to attract new customers for the affordable home segment. Affordable home segment consists of large number of first time home buyers who would welcome an easy understanding of the home loan process and aspects that would facilitate quick and easy home loan disbursals. With the backing of the initiative taken by the RBI, the business in affordable home segment will increase and it will help banks create more leniency and ease of the home loan process in terms of eligibility norms, documentation etc.
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