While the country debates the impact of RBI’s 25 basis points hike in the repo rate – the first hike in four years – the affordable housing segment has much to cheer about with the RBI raising the home loan limits for priority sector lending (PSL) by 25 per cent.
“In order to bring greater convergence of the Priority Sector Lending guidelines for housing loans with the Affordable Housing Scheme, and to give a fillip to the low-cost housing for the Economically Weaker Sections and Lower Income Groups, it has been decided to revise the housing loan limits for PSL eligibility from existing Rs 28 lakh to Rs 35 lakh in metropolitan centres (with population of 10 lakh and above), and from existing Rs 20 lakh to Rs 25 lakh in other centres,” the apex bank said in a statement yesterday. The caveat is that the overall cost of the house does not exceed Rs 45 lakh in the metropolitan centres and Rs 30 lakh at other centres. The RBI added that a circular on the subject would be issued by the end of this month.
“Big boost to Housing for all. Increase in home loan limits under Priority sector lending to Rs 35 lakh in cities & Rs 25 lakh elsewhere to make such bank loans cheaper,” Financial Services Secretary Rajiv Kumar said in a tweet after the RBI announcement.
Significantly, the central bank has also red-flagged the rise in bad loans among small ticket housing loans and hinted at stepping in should the situation continue to worsen. According to the RBI, after a careful analysis of the housing loans data, it was observed that the level of non-performing assets (NPAs) for the ticket size of up to Rs 2 lakh “has been high, and is rising briskly”.
So it advised banks to strengthen their screening and follow up in respect of lending to this segment in particular. “The Reserve Bank is closely monitoring this sector and will consider appropriate policy response such as a tightening of the LTV ratios and/or an increase in the risk weights, should the need arise,” it added.
According to Moneycontrol, things are shakier among the proliferating housing finance companies. There are almost 100 housing finance companies – many focussing on low ticket size lending to the self-employed segment – and their assets under management jumped 24 per cent in the last fiscal courtesy the massive opportunities in affordable housing and and slower credit growth by banks. Alarmingly, the report added that some of these companies have posted gross NPAs of 4-5 per cent, an above-average increase in delinquencies.
Another development that has major implications for the affordable housing segment is the Union Cabinet’s decision to use surplus land of sick PSUs for the construction of such dwelling units. The decision was taken at a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi in Delhi yesterday. “By assigning priority to affordable housing it would make available land parcels of sick and loss making CPSEs (Central Public Sector Enterprises) under closure for the government flagship programme of affordable housing being managed by Ministry of Housing and Urban Affairs,” an official statement said.
The bottomline? First-time home buyers from the lower income groups have never had it as good. Middle-class India, unfortunately, not so much.
With PTI inputs