Borrowers to benefit from lower upfront payout, better pricing
This facility of lower upfront contribution (towards home equity) will be available in cases where home loans taken from HFCs is above Rs. 20 lakh.
Also, such loans should be supported by a mortgage guarantee cover issued by a registered mortgage guarantee company. In India, the total HFCs’ portfolio of retail housing loans stood at about Rs. 3 lakh crore. About 55 per cent of this is loans above Rs. 20 lakh.
Under the latest regulatory relaxation, NHB has allowed HFCs to provide loans above Rs. 20 lakh with a loan-to-value (LTV) ratio of up to 90 per cent if such loans are supported by a mortgage guarantee.
This move could affect pricing of such home loans and encourage HFCs to cut lending rates given that there would be lower default risk thanks to the mortgage guarantee cover. This would increase the number of potential homeowners and add further depth to the retail housing loan market in India.
Simply put, any borrower looking for housing loans above Rs. 20 lakh needs to bring only 10 per cent of the loan upfront and the balance 90 per cent can be funded by the HFC.
Prior to this, the LTV ratio was limited to 90 per cent for loans up to Rs. 20 lakh, 80 per cent for loans up to Rs. 75 lakh and 75 per cent for loans over Rs. 75 lakh.
‘Game changer’
“This is a win-win for both the borrowers and the HFCs. This I believe, can be a big game changer and can indeed revolutionise the retail home loan market in the country,” RV Verma, former Chairman and Managing Director, NHB, told BusinessLine here on Friday. Verma is currently pension regulator PFRDA member.
Verma, who had mooted and pushed for this facility when he was at the helm of NHB, also said that the Reserve Bank of India should allow a similar dispensation for home loans extended by banks.
For India Mortgage Guarantee Corporation, the only registered mortgage guarantee company till date in India, the move will help it share part of the HFC’s risk on high LTV housing loans and enable HFCs to deploy their capital optimally. Business Line
