Real estate gets 'lower risk weightage' boost

Real estate developers on Friday welcomed the RBI's decision to lower risk weightage on housing loans, saying it would boost credit flow to the sector, but demanded that more steps should be taken to revive the industry.

The RBI decided to rationalise the risk weights by linking them only with LTV (loan to value) ratios for all new housing loans sanctioned up to March 31, 2022. With lowering of risk weightage, the requirement of capital provision for banks will come down. Commenting on the monetary policy, Credai national president Satish Magar said linking of housing loans to LTV would boost housing demand.

The move to extend co-lending scheme to non-banking financial companies (NBFCs) and housing finance companies (HFCs) may infuse additional liquidity, he said, but added that realty sector might not get benefit due to strict due diligence norms and eligibility criteria.

"Now that RBI has recognized realty sector as the largest employer, it should also announce steps that are imperative and crucial for the sector's survival and then introduce measures that will aid the sector's revival," Magar said. He sought that all loan accounts that were SMA 1 & SMA 2 as on March 1, 2020 should be made eligible for restructuring.

Naredco President Niranjan Hiranandani said the RBI's decision to rationalise the risk weights on home loans and link them to LTV ratios will give a boost to the sector. "Particularly, this step would benefit borrowers of higher value loans. It would ensure that more credit is available to borrowers.

This move is a much appreciated step recognising the role of the real estate sector in generating employment and economic activity," he added. Anshuman Magazine, Chairman & CEO - CBRE India, said, "RBI's decisions to relax LTV guidelines and rationalize 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.

PropTiger and Housing.com CEO Dhruv Agarwala said it will effectively result in higher credit flow to the real estate sector.

Square Yards CEO Tanuj Shori said, "The linking of risk weightage only to LTV ratio vis-a-vis the earlier practice of risk weightage with both pricing and LTV augurs well for the sector, particularly for high end properties which have been facing severe downward demand pressures."

Welcoming the move, Hardayal Prasad, MD & CEO, PNB Housing Finance said rationalising the risk weights for all new housing loans until March 31, 2022 and the relaxation extended for LTV, shall give the much needed impetus to the housing sector.

"At the same time, home loans will become accessible and competitive for the customers. This move by the central bank addresses the urgency required to boost the real estate sector in the country. This will also lead to the desired recovery of the construction sector which has a very important role to play in creating employment and growth," Prasad said.

JLL India CEO and Country Head Ramesh Nair termed the move as timely and a step in the right direction and said this would provide a fillip to housing loans and have a positive impact on the residential sector. Knight Frank India CMD Shishir Baijal said the measures like rationalisation of risk weights to all new housing loans until March 2022 would give a fillip to housing loan growth.

The RBI has extended the scheme for co-lending to all NBFCs and HFCs which will ease credit availability 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 has been rightly decided to rationalise the risk weights and link them to LTV ratios for all new housing loans sanctioned up to March 31, 2022.

Savills India CEO Anurag Mathur said the rationalisation of risk weight of housing loans is a welcome step by the RBI that could potentially boost housing demand. "With this move, housing loans would eventually get more affordable, thereby benefiting the homebuyers in this sluggish market," he added.