First, the regulator extended for a year the liberal standards for the housing sector introduced during the pandemic. This step can facilitate a higher flow of credit to purchase individual homes.
Governor Das said the decision was made “recognizing the importance of the housing sector and its multiplier effects”.
Second, continued low interest rates should stimulate demand for housing loans.
Risk weights for individual home loans were streamlined in October 2020 by linking them only to loan-to-value (LTV) ratios for all new sanctioned home loans until March 31, 2022. RBI has decided to extend the applicability of these guidelines until March 31. , 2023. This means banks can continue with liberal capital provisioning against new home loans.
This is great news for lenders and will ensure the flow of credit to the sector, said LIC Housing Finance Managing Director Y Viswanatha Gowd. “Government policy support continues to provide momentum and we expect FY23 to see an influx of home buyers and increased construction activity as market sentiment maintains a positive trajectory,” did he declare.
Long-term low interest rates have already served as a key catalyst for the resurgence in housing demand. “The status quo on the repo rate will help sustain current demand levels as interest rates for homebuyers and developers are likely to be maintained by financial institutions,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India.
Ram Raheja, director of S Raheja Realty, expects housing to become a sought-after asset class amid the global political crisis.
“Being a tangible asset and a safe haven investment, people will continue to divert their funds to real estate,” Raheja said.