Tighter RBI rules make home loans tougher

After a rap by Reserve Bank of India (RBI) to banks last Friday regarding overstating salable value of financed property, industry experts say the residential real estate sector would face further downward pressure, especially in affordable and mid-income housing.

The central bank in a notification said that banks must exclude stamp duty, registration and other documentation charges while ascertaining value of the property.

"For those developers who are in the low to mid income category, sales might slow down since the buyers would now have to arrange for these charges on their own," said said Anshul Jain, CEO, DTZ India, a real estate consultant. "The buyers might want to delay their purchase decision till the time they have arranged for such funds and in turn the developers would have inventory that would not be sold." Industry experts say that at a time when the real estate sector is already under pressure, slashing the purchasing power of a customer would impact the realty.

According to data compiled by a real estate web portal, about 76% of the total residential real estate buyers in metros are first time buyers. And most of the first time buyers opt for a housing loan. Also, sales across metros dipped by 13% in January compared to December last year, the data said.

"Survey revealed 41% under-construction flats, priced between R20-40 lakh in NCR, 37% in MMR and 51% and 48% in Hyderabad and Kolkata remain unsold," Said Rajesh Kumar, CEO, MyPropertiesClub.com, a web portal.

While some industry experts say that the impact to real estate would be limited some others say that RBI's guideline will have a substantial impact.

"The banks are providing about 70% to 80% of the value as home loan and hence ensuring enough safety margins for the lending institutions," said Lalit Kumar Jain, national president, confederation of real estate developers' associations of India. "It may also be noted that stamp duty, registration and like charges always add to the value in real estate especially when the economy is in a weak spot."