Good News! RBI hikes repo rate, but home loans up to Rs 35 lakh to cost less in metros

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Published: June 7, 2018 12:49:37 PM

The common man in the metro cities has something to cheer about because the RBI has made it easier for him to avail home loans in the affordable segment.

rbi policy, home loan, affordable housing, Priority Sector Lending , Pradhan Mantri Awas Yojna, real estate, banks, As per the new policy, home loans up to Rs 35 lakh in metros will now qualify for benefits under priority sector lending.

Much to the dismay of several home buyers and other borrowers, the Reserve Bank of India (RBI) hiked the repo rate by 25 basis points in its second bi-monthly monetary policy review on Wednesday, which is set to make all types of loans – including home loan and car loan – costly. However, on the positive side, the common man in the metros has something to cheer about because the RBI has made it easier for him to avail home loans in the affordable segment.

The RBI announced that to bring greater convergence of the Priority Sector Lending (PSL) norms for home loans with the Affordable Housing Scheme, and to boost the low cost housing for the Economically Weaker Sections (EWS) and Lower Income Groups (LIG), “it has been decided to revise the housing loan limits for PSL eligibility from the existing Rs 28 lakh to Rs 35 lakh in metropolitan centres (with population of 10 lakh and above), and from the existing Rs 20 lakh to Rs 25 lakh in other centres, provided the overall cost of the dwelling unit in the metropolitan centre and at other centres does not exceed Rs 45 lakh and Rs 30 lakh, respectively.”

Thus, “as per the new policy, home loans up to Rs 35 lakh in metros will now qualify for benefits under priority sector lending. Earlier, only home loans up to Rs 28 lakh were eligible for these benefits. This is a big boost for the first-time home buyers in metros who are looking to buy properties in the affordable segment. Besides, getting subsidy benefits of Rs 2.68 lakh from the Central government (under schemes like Pradhan Mantri Awas Yojna), owning a house in the metros will soon become a reality for many,” says Anuj Puri, Chairman, ANAROCK Property Consultants.

Industry experts are of the view that apart from home buyers, the revision in housing loan limits for priority sector lending (PSL) is a major incentive both for the real estate sector as well as banks. While the eligibility amount has been increased by 25%, the canvas has also been expanded significantly by increasing the cap on dwelling cost from Rs 35 lakh to Rs 45 lakh in metropolitan areas – an increase of almost 29%.

“Most developers are actively pursuing this segment, but struggling to offer a suitable product within the eligibility criteria for PSL, particularly in metropolitan areas. With this revision, developers will be able to cater to the segment with the highest latent demand. Banks usually struggle to meet their priority sector lending targets and will welcome this move, which will allow them to achieve better yield and asset quality. Overall, this is a major step towards achieving the government’s objective of ‘Housing for All’ by 2022,” says Aashish Agarwal, Senior Director, Valuation & Advisory Services, Colliers International India.

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