Housing Finance Regulations
The Reserve Bank of India has consolidated previous instructions on housing finance, outlining various regulations and guidelines for banks and financial institutions.
Acquisition of Land and Construction of Buildings: Banks can finance land acquisition and construction of buildings, but not for speculative purposes. They must ensure that the loan is used for the intended purpose and that the borrower has a clear title to the land.
Lending to Housing Intermediary Agencies: Banks can lend to housing finance institutions, housing boards, and private builders, but must adhere to guidelines on commercial real estate exposure. They must also ensure that the loan is used for the intended purpose.
Quantum of Loan: The loan-to-value (LTV) ratio and risk weight for different categories of loans are specified. For example, for loans up to ₹30 lakh, the LTV ratio is 90% and the risk weight is 50%.
Scope of Application: These regulations apply to all commercial banks, including regional rural banks and urban cooperative banks.
Chat with the Master Circular:
Download: Master Circular – Housing Finance