OTHER GROUP COMPANIES
market

RBI relaxes rules for residential housing projects

The objective is to increase demand for the residential housing segment

June 24, 2013 11:46 IST | India Infoline News Service
The Reserve Bank of India (RBI) has decided to relax rules for residential housing projects by lowering the standard asset provisioning requirement and risk weight for loans given to those projects.

With risk weight and provisioning requirement coming down, banks will now charge lower interest rates for such loans.

The objective is to increase demand for the residential housing segment.

Earlier, residential housing projects were under the commercial real estate (CRE) category, which attracted higher risk weight and standard asset provisioning. Now, RBI has decided to carve out a sub-sector within CRE as residential housing (CRE-RH).

As loans to the residential housing projects under the commercial real estate (CRE) sector exhibit lesser risk and volatility than the CRE sector taken as a whole, it has been decided to carve out a separate sub-sector called commercial real estate–residential housing (CRE-RH) from the CRE sector, the RBI said in a notification on Friday.

CRE-RH would consist of loans to builders / developers for residential housing projects (except for captive consumption) under CRE segment. Such projects should ordinarily not include non-residential commercial real estate. However, integrated housing projects comprising of some commercial space (e.g. shopping complex, school, etc.) can also be classified under CRE-RH, provided that the commercial area in the residential housing project does not exceed 10% of the total floor space index (FSI) of the project, the notification added.

In case the FSI of the commercial area in the predominantly residential housing complex exceeds the ceiling of 10%, the project loans should be classified as CRE and not CRE-RH.

CRE-RH segment will attract a lower risk weight of 75% and lower standard asset provisioning of 0.75% as against 100% and 1%, respectively for the CRE segment.

OPEN A DEMAT ACCOUNT & Get
FREE Benefits Worth 5,000

FEATURED ARTICLE

BLOGS

Open Demat Account

  • 0

    Per Order for ETF & Mutual Funds Brokerage

  • 20

    Per Order for Delivery, Intraday, F&O, Currency & Commodity