The CRE-RH segment would consist of loans to builders and developers for residential projects
Loans against residential housing falling under commercial real estate projects will now attract lower provisioning of 0.75 per cent against 1 per cent earlier, the Reserve Bank of India said in a directive on Friday.
Besides, the RBI has carved out the residential housing projects under the commercial real estate as a sub-category of the commercial real estate sector.
“The CRE-RH (Commercial Real Estate-Residential Housing) segment will attract a lower risk weight of 75 per cent and lower standard asset provisioning of 0.75 per cent as against 100 per cent and 1 per cent, respectively, for the CRE (Commercial Real Estate) segment,” the RBI said.
The RBI directive follows the Monetary Policy statement 2013-14 to carve out a sub-sector of ‘CRE-Residential Housing’ within the CRE sector as residential housing projects poses lower risk from other commercial estate projects. The RBI further said the CRE-RH segment would consist of loans to builders and developers for residential housing projects except for captive consumption under commercial real estate segment.
It added that such projects should ordinarily not include non-residential commercial real estate.
“However, integrated housing projects comprising of some commercial space (shopping complex, school) can also be classified under CRE-RH, provided that the commercial area in the residential housing project does not exceed 10 per cent of the total Floor Space Index (FSI) of the project.”
In case the FSI of the commercial area in the predominantly residential housing complex exceeds the ceiling of 10 per cent, the project loans should be classified as CRE and not CRE—RH, RBI clarified.
The RBI further said that, “...our extant instruction requiring additional risk-weight of 25 percentage points for restructured housing loans and higher provisioning of 2 per cent for housing loans extended at teaser rates by banks will continue to remain in force.”