Home loan

RBI relaxes loan-to-value rules until end of March next year

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In a bid to make home loans cheaper, the Reserve Bank of India (RBI) announced on Friday that it would streamline risk weightings and link them to loan-to-value (LTV) ratios for new home loans until 31 March 2023. Announcing the decision, RBI Governor Shaktikanta Das said, “Risk weights for individual home loans were streamlined in October 2020 by linking them only to loan-to-value ratios ( LTV) for all new sanctioned housing loans until March 31, 2022. Recognizing the importance of the housing sector and its multiplier effects, it has been decided to extend the applicability of these guidelines until March 31, 2023. “

Commenting on this rule, Ram Raheja, Director of S Raheja Realty, “For the real estate industry, the pandemic followed by the current global political crisis has been a silver lining. Being a tangible asset and a safe-haven investment, people continue to invest in real estate.”

“As home loans are expected to stay cheaper, residential real estate will get a boost. General uncertainty is causing people to refocus on basic requirements like spacious living spaces. loan-to-value rules until March 2023, this will incentivize buyers to take the plunge, leading to a further increase in demand,” he added.

The loan to value ratio (LTV) is the financial ratio that compares the size of a loan that customers will borrow against the value of the asset that the customer will buy. Usually, 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 mortgage borrowers

The Reserve Bank of India kept its policy rates – repo rates unchanged at the first meeting of the Monetary Policy Committee (MPC) for the financial year 2022-23. The repo rate remained at 4 percent. Thus, home loan borrowers who pay easy monthly installments at a flexible interest rate will continue to pay the same interest rate as currently applicable.

“From a real estate perspective, the unchanged repo rate will continue to give homebuyers breathing room, as home loan rates are at an all-time high. The housing sector has seen a revival in 2021 and the Persistently low home loan rates may further boost homebuyer sentiments,” said Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers.

“Homebuyers have the continued opportunity to take advantage of low ten-year interest rates on home loans. The overall cost of living has increased significantly since the start of the Ukraine debacle, and the RBI has taken a proactive and necessary step to maintain the relative affordability of housing in the country,” said Anuj Puri, Chairman of ANAROCK Group.

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