Is The Sum Of Home Loans Given By Banks Actually Regressive?

Earlier, homebuyers could easily get the full amount of the funds required for the property from banks. To increase their volumes, lenders also used to include the registration cost with the property cost, and with the help of this, they would calculate the Loan-to-Value ratio (LTV).

But then to avoid more than required control and authority, there was capping done by RBI on loans offered in December 2010. LTV loans till the limit of Rs.20 lakhs were capped at 90% while more than Rs.20 lakhs were capped at 80%. Then later in 2012, banks were restricted to add charges of documentation, stamp duty and registration in the price of the house property, by the RBI. After that in 2013, for loans valuing more than 75 lakhs, 75% LTV was introduced by RBI. In 2015, the LTV was relaxed by a small amount, that is, it was increased to 90% for loans up to the limit of Rs.30 lakhs.

All these changes and modifications in the system made the home loan market very stable.

The Vision Of ‘Housing For All’ by 2022
The mission of housing for all is a very noble and progressive mission initiated by the government. To achieve this dream, various measures have been taken like giving infrastructure status to the affordable housing segment, Real Estate Regulation Act (RERA), Pradhan Mantra Awas Yojana (PMAY) etc.

Then in November 2016, demonetization (note-bandi) was introduced which decreased the cash threat while purchasing homes. Consequently, property prices became stable by regulating themselves by 15-25%. Moreover, home loan rates offered by banks has also come down by 1%-8.35%.

Challenges And Issues Faced By Homebuyers
The homebuyers across the nation are taking these changes in consideration and are showing activeness to buy homes. Homebuyers will decide the budget, choose a property, compute and calculate the eligibility for home loans, managing the funds for registration, interiors etc.

Sometimes, getting a home loan seems easier than managing the hard money required. This comes to around 20%-40% of the total price of the property. This becomes difficult because a normal buyer wants years to save up to an amount that is 2%-4% of the price of the property.

There are many homebuyers who are availing a home loan as well as a personal loan. The EMI on personal loans amounts to almost double of the EMIs on home loans. That is the reason why banks prefer people availing a bigger amount of home loan rather than availing a different personal loan.

Home Loan Portfolio Status
The negligence in home loans, home loan rates offered by banks and the losses are the lowest over loan sizes. Because of this, banks are able to afford more risk by the help of greater LTVs.

Mild Property Prices
There are many factors in the recent past like demonetization, unsold inventory in real estate, easy funding for real estate sector and many more which are expected to help in the stability and calmness in the property prices for the coming years.

Prudent Lending
No change has been made in the range of LTV which is 90%. The effective measure which can be taken is to make a compulsory relaxation in LTV by 5-10% for investors to distinguish between the homebuyers who are investing for the first time and the investors.

When India is moving towards the dream of Housing for All, a little less stringency in the rules of LTV will actually benefit many families across the country.