Shares of real estate developers and housing finance companies dropped on Tuesday after the Reserve Bank of India (RBI) tightened norms for housing loans. India?s top two real estate developers DLF and Unitech fell over 3% each to Rs 349 and Rs 86, respectively. Indiabulls Real Estate scrip also fell over 3% while the BSE?s Realty index dropped 2.6%, with 11 of its 13 components declining. ?Many developers across the country are offering a 10/90 scheme wherein the home buyer pays 10% upfront and the balance 90% on possession. With LTV capped at 80%, such schemes are at risk of being discontinued,? said Adhidev Chattopadhyay, analyst, Edelweiss Capital. ?Players which focus primarily on the premium housing segment may be impacted negatively in terms of volumes,? he added.

The central bank has increased the provisioning by commercial banks for teaser loans (loans which offer low borrowing cost for the initial few years) to 2% from current provisioning of 0.4%.

The RBI further decided to have a ceiling of 80% on the loan-to-value ratio (LTV) and has also increased the risk weight to 125% for residential housing loans of Rs 75-lakh and above. Although, the new norms are meant for commercial banks, but the National Housing Board (NHB), the regulator for NBFCs, is likely to follow suit. On such expectations, shares of some of the top housing finance companies reacted negatively, while banking stocks closed with gains on a day when the benchmark BSE Sensex closed 0.05%, or 9.94 points down to 20,345.69.

RV Varma, CMD, National Housing Bank, regulator for housing finance companies said, ?We are going to discuss the three changes made in the arena of home loans, when we meet the RBI officials shortly.?

While LIC Housing Finance dropped about 2% to Rs 1,318, HDFC fell 1% to Rs 702, Dewan Housing Finance Corporation declined 2.5% to Rs 308. Analysts believe housing loans are only a small portion of banks overall portfolio and hence, it won?t impact them as much as it will impact NBFCs, for whom mortgage finance is a core business.