Housing Finance Regulations
The Reserve Bank of India has consolidated previous instructions on housing finance, outlining various regulations and guidelines for banks.
Acquisition of Land and Construction of Buildings
Banks can finance land acquisition and construction of buildings, subject to certain conditions. However, they should not grant finance for certain activities, such as land banking, speculation, or financing of companies engaged in real estate business.
Lending to Housing Intermediary Agencies
Banks can lend to housing finance institutions, housing boards, and private builders, subject to specific terms and conditions. They must also adhere to guidelines on commercial real estate exposure.
Quantum of Loan
The loan-to-value (LTV) ratio and risk weight for different categories of loans are specified. For example, the LTV ratio for loans up to ₹20 lakh is 90%, with a risk weight of 50%.
Scope of Application
These regulations apply to all scheduled commercial banks, excluding regional rural banks.
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Download: Master Circular – Housing Finance