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With the recent move by the RBI to allow a LTV of upto 90 percent, owning a home isn't a tedious exercise anymore.

The recent move by the Reserve Bank of India (RBI) to allow a Loan-To-Value ratio (LTV) of upto 90 percent for home loans of Rs 30 lakhs or less, is being applauded by the industry players and home-buyers. Earlier, 90 percent of LTV was allowed only for loans upto Rs 20 lakhs. A 90 percent LTV indicates that the buyer will have to arrange for only 10 percent of the property value from his pocket and the rest can be financed through banks. Loans upto Rs 30 lakhs fall under the 'affordable or low-cost housing' category.

Sriram Mahadevan, business head, Happinest, Mahindra Lifespaces, says, "This is an important decision for the real estate sector, especially for the affordable housing segment. Decreasing the risk weights attached to home loans, lowering of the repo rate and increasing the loan amount, are important steps in reducing the EMI burden on the common man. This will not only give the much-needed boost to the market but also help re-instill consumer confidence and improve the overall sentiment."

According to a recent report by CRISIL, around 80 percent of home loan borrowers and 70 percent of home loans (by value) would meet the criteria for lower risk weights set by the RBI and thereby, benefit from the change in regulation. Home loan borrowers in smaller cities and peri-urban areas are likely to be the biggest gainers from the RBI's move due to the limited supply at affordable price points in the larger cities. 

Mona Jalota, vice-president, operations and strategy Coldwell Banker India, adds, "If the banks agree to grant 90 percent loan for a property that costs below Rs 30 lakhs, it is going to be a real boost for the government's initiative of 'Housing for All'. In the current scenario, all the developers are focussing on the luxury market where we have seen the demand only in the last three years. The maximum gap between the availability and demand is in the lower income group and this segment of housing, if they focus on, will see healthy sales." If the government is providing 90 percent of the loan value, then paying 10 percent becomes very affordable.

Harjith D Bubber, MD and CEO, Rivali Park, CCI Projects, feels, "It will be helpful on a macro scale in the real estate industry. Only in Mumbai, its affect won't bestow its benefits but there will be a transition in the world of real estate. More buyers will be instigated to buy residential properties, which are going to push the sales and will also facilitate the buyer with the purchasing power to buy property. Homes will be more affordable for the population falling under the lower income group."

When Mumbai comes into consideration, then the developers are not going to gain much because the minimum property rate is Rs 30 lakhs. However, areas beyond Thane and Navi Mumbai may see some activity. On the whole, the developers might derive benefits but no colossal ones. For any home buyer, it's going to be easier to purchase a property as the banks will be providing most of the funds. It would provide the benefaction as the initial outflow will be low and easier to afford a home as the rest of the amount would be paid by the bank.

Sonal Mehta, a property consultant in Vasai says, "This move is going to help people who are looking for a 1-BHK or a studio apartment in areas beyond Thane and Navi Mumbai." The developers with affordable projects will definitely get a boost in their sales because home-buyers will prefer investing in affordable housing as getting loans will be quicker and they will have to pay less, which will benefit the developers in the affordable housing segment. Banks can now push more housing loans, given the lower risk perception of the regulator on the affordable housing segment.

Home loan borrowers will benefit with the lowest interest rate on the loan as the duration of the loan will be shorter. According to industry experts like Gaurav Shah, director, sales and marketing, Ravi Group, "This move is going to be beneficial for a very small percentage of homebuyers. Hence, it will have a minimal effect on the real estate market. The property prices in Mumbai have moved up much above Rs 50 lakhs, even for affordable houses; this way, this move may not bring any significance to the real estate market."

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