The Government of India has extended the lower risk weightage on housing loan by one year from 31st March 2022 to 31st March 2023. The Reserve Bank of India (RBI) made an announcement in this regard on Friday while speaking on the RBI Monetary Policy meeting outcome. The Central Bank of India said that the move aims to boost credit flow to the real estate sector.
This means credit flow for housing sector will remain smooth as more funds will be available at banks for home loan disbursal. Highlighting the benefit of low risk weightage on home loans, RBI Governor Shaktikanta Das said that the move means requirement of capital provision for banks would come down and it would ensure more credit is available to borrowers, particularly for high-end properties.
The RBI Governor went on to add that enable Indian banks lend more to individual homebuyers without feeling the stress on their balance sheets. In other words, it would help lenders on capital adequacy front and enable them to provide more home loans, a win-win situation for the new borrowers and the housing sector. As the RBI has kept key rates unchanged, it simply mean that low home loan interest rate regime would continue further that means home loan borrowers won't have to pay higher monthly EMI as home loan interest rates at various banks are expected to maintain status quo.
After RBI maintaining status quo on key interest rates and extending lower weightage on housing loan by one more year, probability of developers passing on the rising input costs to the homebuyers have come down. Now, builders may not increase the house property prices as the RBI's move may boost the confidence of homebuyers. So, home loan EMI of the new borrowers are expected to remain at lower levels in the wake of no rise in house property prices. As home loan interest rates are at lowest decadal levels, chances of banks raising home loan interest rate are high.
So, it's an opportunity for the home buyers to buy their dream home in current lowest home loan interest rate regime choosing fixed home loan interest rate. The Reserve Bank had in October 2020 rationalized the risk weights for individual housing loans by linking them only with loan to value (LTV) ratios for all new housing loan.
