The real estate industry stands to benefit from the revised guidelines of Priority Sector Lending by the Reserve Bank of India (RBI).
The loan limits for housing loans and Micro Finance Institutions (MFI) loans qualifying under priority sector have been reviewed. As per the new guidelines, home loans up to Rs 28 lakh in metros and Rs 20 lakh in other centers will form part of the directed lending as long as the cost of the property is not more than Rs 35 lakh and Rs 25 lakh, respectively.
“It is a very positive development and augurs well for host of affordable housing initiatives with cost of units up to Rs 50 lakhs – with affordable housing finance at lower interest rates than normal home loans and reduced EMIs by 10 percent. The country will welcome it,” says V Suresh, former CMD, HUDCO.
The housing loans to banks’ own employees will be excluded. Housing loans which are backed by long-term bonds are exempted from the Average Net Bank Credit (ANBC) banks. Housing loans amounting up to Rs 28 lakh to individuals in metropolitan centres and Rs 20 lakh in other centres under priority sector or take benefit of exemption from ANBC, but not both.
In terms of rate of interest on bank loans, it will be as per the directives issued by the Department of Banking Regulation be revised from time to time. Also, no loan related and adhoc service charges/inspection charges would be levied on priority sector loans up to Rs 25,000.
“The move to include the interest rates service tax will also lead to lower EMIs. The allocation of additional funds for Priority Sector lending will also give a quantum jump in housing loans,” says Suresh. The banks also share the same sentiment.
Banks can also lend up to Rs 5 crore per borrower for building social infrastructure such as schools, healthcare facilities, drinking water facilities and sanitation facilities in tier II to tier VI centres.
It is evident that the RBI is making all efforts to give a push to the Indian real estate market, which otherwise is struggling. However, only time will tell how much it would help in boosting the affordable housing segment and contribute in Modi’s mission in achieving ‘Housing for All by 2022’.