Real estate developers welcome RBI’s decision to reduce risk weighting for home loans

The RBI decided to rationalize the risk weights by linking them only to the LTV (Loan to Value) ratios for all new housing loans sanctioned by 31 March 2022.

Real estate developers welcomed RBI ‘s decision on Friday to reduce the risk weighting of housing loans, saying that it would boost the credit flow to the sector, but called for more action to be taken to revive the industry. The RBI decided to rationalize the risk weights by linking them only to the LTV (Loan to Value) ratios for all new housing loans sanctioned by 31 March 2022. With a reduction in risk weighting, the requirement for the provision of capital for banks will be reduced.

Commenting on monetary policy, CREDAI National President Satish Magar said that linking housing loans to LTV would boost demand for housing. Moving to extend the co-financing scheme to non-banking financial companies (NBFCs) and housing finance companies (HFCs) may infuse additional liquidity, he said, but added that the real estate sector may not benefit from strict due diligence standards and eligibility criteria. “Now that RBI has recognized the real estate sector as the largest employer, it should also announce measures that are essential and crucial to the survival of the sector, and then introduce measures that will support the revival of the sector,” Magar said. He requested that all the loan accounts that were SMA 1 & SMA 2 as of 1 March 2020 be eligible for restructuring.

Naredco President Niranjan Hiranandani said that RBI ‘s decision to rationalize the risk weights of home loans and link them to LTV ratios will boost the sector. “Particularly this step would benefit borrowers from higher value loans. It would ensure that more credit is available to borrowers. This move is a much-appreciated step that recognizes the role of the real estate sector in generating employment and economic activity,” he added.

Anshuman Magazine, Chairman & CEO-CBRE India, South East Asia, Middle East & Africa, said, “RBI ‘s decision to relax LTV guidelines and streamline risk weights for home loans will further encourage homebuyers.” Anarock Chairman Anuj Puri said the announcement will definitely encourage banks to lend more to individual homebuyers without feeling the stress on their balance sheets.

Dhruv Agarwala, CEO of PropTiger and, said that it will effectively result in higher credit flows to the real estate sector. Square Yards CEO Tanuj Shori said, “The linkage of risk weighting only to the LTV ratio vis-a – vis the earlier practice of risk weighting with both pricing and LTV augurs well for the sector , particularly for high end properties that have been under severe downward demand pressure.” Hardayal Prasad, MD & CEO of GNP Housing Finance, welcomed the move by rationalizing risk weights for all new homes.

“At the same time, home loans will become accessible and competitive to customers. This move by the central bank addresses the urgency needed to boost the real estate sector in the country, which will also lead to the desired recovery of the construction sector, which has a very important role to play in creating jobs and growth,” Prasad said. JLL India CEO and Country Head Ramesh Nair concluded that the move was timely and a step in the right direction, stating that it would provide a boost to housing loans and have a positive impact on the residential sector.

Knight Frank India CMD Shishir Baijal said that measures such as the rationalization of risk weights for all new housing loans until March 2022 would give a boost to the growth of housing loans. The RBI has extended the co-financing scheme to all NBFCs and HFCs, which will ease the availability of credit for the real estate sector, he added. Meanwhile, Siddhartha Mohanty, MD & CEO of LIC HFL, said that in recognition of the role of the real estate sector in generating employment and economic activity, it was rightly decided to rationalize risk weights and link them to LTV ratios for all new housing loans sanctioned by 31 March 2022.

Savills India CEO Anurag Mathur said that the rationalization of the risk weight of housing loans is a welcome step by the RBI that could potentially boost demand for housing. “With this move, housing loans would eventually become more affordable, benefiting homebuyers in this sluggish market,” he added. Emami Realty MD & CEO Nitesh Kumar said that RBI ‘s move to housing loans will boost credit sentiment and bring much needed positivity to the sector. Sunteck Realty CMD Kamal Khetan said homebuyers will be able to access more capital easily at all price points.

It would also help lenders on the capital adequacy front and enable them to provide more loans, he added. Gaurs Group MD Manoj Gaur said that lowering the risk weighting of home loans and linking them to LTV will only ensure more credit to customers and thus to the sector. Signature Global Chairman Pradeep Aggarwal said the LTV loan will help the real estate sector. S Raheja Realty Director Ram Raheja said it will provide the much-needed boost and encouragement to home buyers in the run-up to this festive season.

Honeyy Katiyal, founder of Investors Clinic, said RBI ‘s announcement to extend the co-loan scheme to all NBFCs and HFCs will help ease the availability of credit. “The move by RBI to link risk to loan to value will help banks break down the prudent approach to lending. The move is bound to offer a much-needed start to the marketplace lending and liquidity cycle,” said Kaushal Agarwal, Chairman of The Guardians Real Estate Advisory.

The RBI’s stand to rationalise risk weightage on home loans is a step in the right direction and homebuyers will benefit immensely from this move, said Ankush kaul, President (Sales & Marketing) – Ambience Group. Jyoti Prakash Gadia, Managing Director, Resurgent India, said that retail credit and real estate will also be filled with regulatory relaxations announced with an increase in the retail credit limit of Rs 7.50 and a rationalization of the risk weight associated with the housing loan value.