The government is extending the weighting of home loans. Top 5 takeaways for home borrowers

Housing loan in India: The Indian government has extended the lower risk weighting on housing loans for another year, from March 31, 2022 to March 31, 2023. The Reserve Bank of India (RBI) made an announcement in this regard on Friday during a speech on the outcome of the RBI monetary policy meeting. . The Central Bank of India said the move was aimed at boosting the flow of credit to the real estate sector. This means that the flow of credit for the housing sector will remain smooth, as more funds will be available in banks for the disbursement of housing loans.

Here we list the top 5 takeaways for mortgage borrowers following this RBI’s move:

1]Ease of availability of home loans: Underlining the benefit of low risk weighting on home loans, RBI Governor Shaktikanta Das said the move would mean the capital provision requirement for banks would come down and ensure more credit is available to borrowers, especially for high-end properties.

2]Increase in home loans: The RBI Governor went on to add that allow Indian banks to lend more to individual buyers without feeling the stress on their balance sheets. In other words, it would help lenders on the capital adequacy front and enable them to provide more home loans, a win-win situation for new borrowers and the housing industry.

3]Impact on the EMI home loan: As the RBI has kept policy rates unchanged, it just means that the low home loan interest rate regime will continue, meaning home loan borrowers will not have to pay higher monthly EMIs, as interest rates on home loans from various banks are expected to maintain the status quo. .

“The real estate sector had been preparing for an increase in repo rates, and the fact that this did not happen is obviously positive for real estate borrowers,” said Anuj Puri, Chairman of ANAROCK Group.

4]Status quo on real estate prices: After RBI maintained the status quo on key interest rates and extended the lower home loan weighting for a year, the likelihood that developers would pass on higher input costs to homebuyers has diminished. Now builders may not raise property prices as the RBI’s decision may boost buyer confidence. Thus, the EMI of home loans from new borrowers should remain at lower levels in the wake of the absence of an increase in house prices.

Rahul Pande – Director, Justo Realfintech Pvt Ltd said, “RBI’s decision to maintain a status quo was in line with expectations due to growing uncertainties in the market. sales in the last two years of the pandemic. The decision will further bolster the confidence of first-time buyers, who would still want to reap the benefits of lower interest rates before developers pass on the additional burden of input costs to buyers.

5]Food for home loan fixed interest rate: As interest rates on home loans are at their lowest in a decade, the chances of banks raising interest rates on home loans are high. So this is an opportunity for home buyers to buy their dream home under the current regime of lowest home loan interest rates by choosing a fixed interest rate home loan.

Express yourself on the subject; SEBI-registered tax and investment expert Jitendra Solanki said: “Due to the lowest mortgage interest rate regime, most banks do not offer fixed interest rates on home loans over the whole term but for a certain period say 1 year to 5 years My suggestion to new home loan borrowers is to go for any fixed interest rate on the loans mortgages offered by banks, as the interest rate on mortgages would remain at current levels or increase in the coming quarters.

Advise new mortgage borrowers to opt for a fixed mortgage interest rate; Ashish Jain, Managing Director of Star HFL, said: “Home borrowers with variable rate loans would be expected to honor the interest rate increase, which would result in either an increase in the EMI or the term of the loan. . One can consider the pros and cons of moving to a fixed rate. scheme after careful consideration of the cost-benefit ratio after analysis of industry offers. »

The Reserve Bank had in October 2020 streamlined risk weights for individual home loans by linking them only to loan-to-value (LTV) ratios for all new home loans.

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