Wednesday, November 3, 2010

Banks will now lend only 80% of property price

Now, anyone applying for a home loan from a bank will have to pay a margin money of at least 20% of the value of the property. This in effect means that you will have to shell out more from your own savings to buy that house you have been eying for a while. Earlier, this margin money varied between 10% and 15 %
Top industry officials feel this is a pre-emptive measure and is a warning sign for all in the real estate sector — developers, financiers and also the buyers — that there could be danger ahead.

“The RBI has always taken pre-emptive measures to prevent asset bubbles, particularly in real estate. It is in this context that the RBI has restricted the maximum loan to value ratio to 80% and increased risk weights on housing loans above Rs 75 lakh,” said Renu Sud Karnad, MD, HDFC, the mortgage finance major.

The RBI measure could also work in favour of home buyers in the form of a either a slow or nil rise in real estate prices. “The message from RBI is clear: There is a worry about real estate prices spiralling. This concern will ensure that there is a short-term cap on real estate prices and in the near future it may come down marginally,” said Gagan Banga, CEO, Indiabulls Financial Services. “A correction in prices should result in higher volumes given the strong macro economic conditions,” Banga added. Read More

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