Housing Finance Easier Norms
Injecting a major booster to the real estate sector, the National Housing Bank (NHB), regulator for HFCs, has lowered the risk weights for loans extended by such companies, which means lesser capital that an HFC has to set aside for providing a home loan. In the changed scenario in the home loans biz the HFCs can now lend more funds to real estate developers and individual home buyers as the move is expected to free up more capital of HFCs, helping them to increase the volume of lending to developers and individual home buyers and the lending may also come at a cheaper rate.

According to the Chairman and Managing Director, R V Verma, by lowering the risk weights, NHB is signaling that assets (loans) in the housing sector are in good health and the risk perception in the sector has come down. Risk weights for home loans extended by HFCs are now in alignment with those for commercial banks. To give a boost to the economy, Reserve Bank of India had in June announced two steps to increase the flow of bank credit to builders/developers and individual buyers and it created a special category-commercial real estate-residential housing (CRE-RH) that attracted lower risk weight and lower standard asset provisioning. Builders/developers falling under the CRE-RH category will attract lower risk weight of 75% (100% for CRE projects) and lower standard asset provisioning of 0.75% (1% for CRE projects). The RBI also lowered the risk weight on home loans above Rs 75 lakh to 75% from 125%.