RBI Indicates Cheaper Housing, Infra Loans


BANGALORE: Recently Reserve Bank of India said that ‘banks would not have to maintain Cash Reserve Ratio (CRR) or Statutory Liquidity Ratio (SLR) and will not have to meet priority-sector lending targets for funds raised through bonds for extending credit to these sectors’.

After RBI publicized the statement to increase the demand of infrastructure and housing, shares of real estate and infrastructure companies are trading higher by up to 6 percent and there is now a new definition of affordable homes. However, RBI also said that the definition would change with the inflation trajectory.

Rajeev Talwar, executive director, DLF said that, "Any easing will be to people's advantage. It will encourage people to go for own homes. It will increase demand for homes," reports Business Standard.

The home loans of up to 50 lakh for the houses of valuing up to 65 lakh in metros and home loans of up to 40 lakh for houses valuing up to 50 lakh in other cities are now affordable, which in turn would lead the housing companies to expect 25-50 basis points. This means cheaper loan rates in the medium term.

There are a few segments specified by RBI that allow banks to lend under the base rate and customers will not enjoy any benefit until banks lower the base rate. Usually banks offer home loans at base rate or with a marginal spread so retailers have to wait for some more time to get benefits.

According to the experts, since banks are already excused from CRR, SLR and priority-sector lending requirements, they will be in a more profitable position than the non banking financial companies that offers home loan.

However, the recent RBI’s move would lower the funding costs for infrastructure companies and provide banks with the liquidity to fund long development projects. Since the assets of infrastructure companies matures over 10-15 years, the funding leads to an assets-liability mismatch for banks.

According to a banker, “The difference in home loan rates between the two could be as high as 100 basis points once banks realize the full impact of the incentive.”