Under the directions from Finance Ministry, the RBI, in a notification today, eased credit availability for the affordable housing sector in India. We believe the central bank’s fresh measures will enhance availability of funds to the sector, while not having material impact on affordability. The above measures along with key
announcements in Budget 2015 highlight the government’s intent to give impetus to the real estate sector.
Banks can issue long-term bonds with a minimum maturity of seven years to raise resources for lending to affordable housing (defined as housing loans eligible under priority sector lending by RBI and also housing loans to individuals upto INR5mn for property valued up to INR6.5mn in Mumbai (clarity awaited whether intent is Greater Mumbai or MMR), New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad, and INR4mn for property valued up to INR5mn in other cities.
The above measures will enhance availability of funds to the affordable housing sector. The measures will not significantly impact interest rates and accordingly affordability, as current home loan rates (~10.25%) are already near base rates (10%) but in the Medium Term will help Small & Genuine Home BUYERS across India as Interest Rates Will begin to Fall in the next 24 months.
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