With an aim to improve credit flow for the housing sector the Reserve Bank of India (RBI) on Wednesday doubled the limit for individual housing loans offered by urban cooperative banks (UCBs) and rural cooperative banks (RCBs). The limit is increased by 100 per cent which was last revised in 2011 and 2009. Given the rise in housing prices, the revised limits will facilitate the growth of the housing sector, say experts.
“In a positive move for the housing sector, RBI has increased the credit flow to the housing sector by policy announcements pertaining to cooperative banks which will impact both individual home buyers and developers. The 100 per cent upward revision in credit limit for individual homebuyers through cooperative banks will provide increased credit access to homebuyers in suburban areas as well as tier-2/3 cities,” says Samantak Das, chief economist, and head of research and REIS, India, JLL.
V Swaminathan, Executive Chairman, Andromeda and Apnapaisa says, “The RBI has considered the cooperative banks as equal partners in the growth, thus raised their lending limit by 100 per cent, which means that these banks can now lend double the amount that they were doing so far. This move can be seen as a major boost for the real-estate sector as it will now enhance the availability of easy credit for the residential housing segment.
Under the proposed norms rural cooperative banks are also allowed to extend finance for commercial real estate – residential housing category within the limit of 5 per cent of their total assets. “Allowing rural and district cooperative banks to lend to housing developers under the CRE-RH (commercial real estate– residential housing) categorization within their 5 per cent credit limit of total asset base will support developers of affordable housing projects who have struggled for finance, especially for projects in the peripheral and smaller urban centres,” says Das.
On the measures announced for the cooperative banking sector Aarti Khanna, Founder and CEO Askcred.com says, “RBI has increased the existing limits on individual housing loans by cooperative banks both for Urban Co-operative Banks and Rural Cooperative Banks. This is a welcome move considering that limits were last revised almost a decade ago and with the increase in housing and real estate prices, increasing the limit was needed. This would give some uplift to the affordable housing segment.”
The announcement was made on Wednesday following the monetary policy meeting where the central government also increased the repo rate by 50 basis points (bps) - which is the second hike in two months. The hike was aligned with expectations in the backdrop of high inflation along with geopolitical tensions.
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