NHB wields axe on home loans

“No housing finance company shall grant housing loans up to Rs 20 lakh to individuals with loan-to-value (LTV) ratio exceeding 90 per cent and grant all other housing loans above Rs 20 lakh to individuals with LTV ratio exceeding 80 per cent,” the NHB said in a circular issued to housing lenders.

The new norms by NHB come few days after RBI asked banks to provide loans up to 80 per cent of property value. “The changes are done with a view to make the system more robust,to create a higher capital buffer and the provisioning which will act as a cushion in the time of downturn in the assets getting stressed,” NHB Chairman and Managing Director R V Verma said.

The NHB also asked housing finance companies to keep 0.4 per cent of outstanding loans to builders,corporates aside.

The provision can be implemented in two phases by keeping 0.2 per cent of loans aside by this fiscal end and 0.4 per cent by September 2011.

The NHB also asked the lenders to keep more money aside in case it is giving at least Rs 75 lakh loan to individual borrowers.

The housing finance regulator asked the lenders to keep 2 per cent of loan aside in case they are giving controversial teaser loans,which are given at concessional interest rates in the initial years.

“The changes will act as a layer of protection for lending institution and also cover the additional risk which they will be exposed to times of volatility and potential default risk,” Verma added.