Currently, in terms of the extant regulations on capital charge for credit risk of individual housing loans by banks, differential risk weights are applicable based on the size of the loan as well as the loan to value ratio (LTV).
RBI today said, "Recognising the criticality of real estate sector in the economic recovery, given its role in employment generation and the interlinkages with other industries, it has been decided, as a countercyclical measure, to rationalise the risk weights by linking them only with LTV ratios for all new housing loans sanctioned up to March 31, 2022."
These loans will now attract a risk weight of 35% where LTV is less than or equal to 80%. Also, a risk weight of 50% where LTV is more than 80% but less than or equal to 90% will be applicable now.
RBI earlier in June 2017, introduced a more staggered risk weights system for individual housing loans which depended upon the size of loans. Here's what they were:
- Home loans up to Rs30 lakh had a risk weight of 35% on LTV ratio less than 80%, while 50% risk weight was involved between the LTV ratio of 80-90%.
- Home loans above Rs30 lakh but up to Rs75 lakh had 35% risk weight for LTV ratio less than 80%.
- Home loans above Rs75 lakh had a risk weight of 50%.
RBI said, "This measure is expected to give a fillip to bank lending to the real estate sector."
At around 1.23 pm, Nifty Realty was trading at 217 down by 0.91%. All stocks listed on this index were trading in red with Oberoi Realty, Sobha, DLF, Phoenix, Sunteck, Indiabulls Real Estate, Prestige and Godrej Properties tumbled in the range of 0.16-2%.