Ready-to-serve ‘home loans on wheels’ was a recent news item from Chennai. The State Bank of India Chairperson, Arundhati Bhattacharya, flagged off the project as part of the bank’s initiatives to expand its support to the housing sector.
Banks coming to the doors of the customer to canvas business is nothing new, but the sanction of a loan like this is a new and positive development. A housing loan normally requires various pre-sanction formalities such as legal scrutiny of documents for title clearance, valuation of the property in question to decide on the loan amount, site inspection in order to ensure the viability/progress in the preparation for construction and branch manager’s recommendations.
These are sometimes time consuming, and a spot sanction may often mean only an ‘in principle’ formality unless, of course, substantial ground work has already been made.
Whatever be the methodology adopted by the SBI, or other banks and financing institutions, there is increasing interest shown by banks/other financial institutions and by the regulator, Reserve Bank of India, in recent days in their coverage of housing loans.
This is highly commendable and deserves to be welcomed. For some time, the RBI had frowned upon many frauds in property loans granted by banks, mainly bulk loans, and even increased the risk weight for home loans as a cautionary step. Now proposals in the budget for 2014-15 such as increase in the ceiling for ‘affordable housing’ and allowing banks to raise bonds for finding resources to finance such projects has been a shot in the arm for the housing sector.
RBI’s initiativesTaking a cue from the budget, the RBI, vide its circular dated July 15, issued the following guidelines/directions to banks:
Affordable housing projects will be such projects with a cost not exceeding Rs. 65 laks and a loan component of Rs. 50 lakh in the six metros of Mumbai, New Delhi, Kolkata, Chennai, Bangalore and Hyderabad. In other centres, the cost ceiling will be Rs. 50 lakh and the loan amount, Rs. 40 lakh. The eligible applicant will be a ‘family’ and only for one unit. The loan can be for purchase or for construction.
Banks can raise funds for financing the project by issuing long-term bonds for a period not exceeding seven years. The funds raised will be exempted from reserve requirements such as Cash Reserve (CRR), and Statutory Liquidity (SLR).
Housing loans to individuals upto Rs. 25 lakh in metro centres with population of over 10 lakh, and Rs. 15 lakh in other centres.
The loans sanctioned exclusively for economically weaker sections and low income groups, the total cost of which should not be more than Rs. 10 lakh, will be considered ‘priority sector’. The family income limit for identifying the applicant is Rs. 1.20 lakh per year, irrespective of the location.
Loans to housing finance corporations approved by National Housing Bank for individual dwelling houses OR for slum clearance and rehabilitation of slum dwellers, again subject to a ceiling of Rs. 10 lakh per borrower and at an interest rate of two per cent above the lowest lending rate for housing by such banks, will also be treated as priority sector lending, subject to a ceiling of 5 per cent of total priority sector lending by the bank concerned.
The effect of all this is renewed interest in lending to the housing sector. This will encourage developers/ builders to take up more projects.
