Home Loan value is now increased for properties

On Thursday the RBI raised the Loan to Value (LTV) of home loans in which the banks can disburse 90 percent of the value of the property valued within Rs. 30 lakhs.

There were discussions that, is the repo rate reduction enough for boosting the purchase decision of the buyers to buy in the affordable segment of housing as the EMI goes down. The economists argued that only a reduction in the EMIs is not suffice to boost the buyers to buy in the affordable real estate market. The reason was that there is a small amount of reduction in the EMI even if there is a 50 basis points reduction. The experts argued that this much reduction in the EMI is not enough to trigger more purchase decisions. This is exactly the reason why the market demanded more and more specific measures to boost the affordable segment of housing especially in cities where the cost of houses are more like Delhi, Bengaluru, Noida, Gurgaon and other places.

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In a strategic move the RBI gave another additional measure to boost housing within the budget limits of the end users. In its directive to banks on Thursday, the RBI sent a circular to banks that all bankers can now provide home loans amounting to 90 percent of the property value whose prices are within Rs. 30 lakhs. Earlier the ceiling on the banks to offer loans up to 90 percent as LTV was up to a property value of Rs. 20 lakhs. Now the limit is increased to Rs. 30 lakhs. The trend watchers opine that this decision and circular of the central bank of India will certainly boost the sales of apartments and houses in the affordable sector. This will be truer in cities like Mumbai, Bengaluru and places where flats and apartments are available at that price or even below Rs. 30 lakhs but the housing market is priced higher. This, opines few veterans is the correct move at this time as the sector needs few new entrants and the sale of the flats and apartments which is unsold. This will certainly help the new entrants to build up their business in real estate.

The RBI’s decision came at the right moment opines few financial experts too as this decision came when the banks are reducing the interest rate of loans and home loans. The RBI directive said that the Loan to value (LTV) ratio in case of property purchase within Rs. 30 lakhs would be 90 percent. For the properties above the value of Rs. 30 lakhs and within Rs. 75 lakhs the loan to value ratio is 80 percent. For the loan of properties valued more than Rs. 75 lakhs the ratio of LTV is 75 percent.