RBI policy positive for housing sector

Reserve Bank of India's policy announcements on Friday are likely to boost the housing sector on two counts.

First, the regulator has extended the liberal norms for the housing sector introduced during the pandemic for another year. This step may facilitate higher credit flow to buy individual housing units.

Governor Das said the move was taken "recognising the importance of the housing sector and its multiplier effects."


Second, continuation of the soft interest rates is expected to push demand for housing loans.

The risk weights for individual housing loans were rationalised in October 2020 by linking them only with loan to value (LTV) ratios for all new housing loans sanctioned up to March 31, 2022. RBI has decided to extend the applicability of these guidelines till March 31, 2023. This means, banks can continue with liberal capital provisioning against new home loans.

This is great news for lenders and will ensure credit flow to the sector, said LIC Housing Finance's managing director Y Viswanatha Gowd. "The policy support from the government continues to provide thrust and we expect FY23 to witness an inflow of homebuyers and increased construction activity as the market sentiments maintain a positive trajectory,” he said.

The low interest rates over a long period has already served as a key catalyst for the resurgence of demand for housing units. "The status quo on repo rate will help maintain the current demand levels as interest rates for both homebuyers and developers are likely to be maintained by financial institutions,” said Shishir Baijal, chairman & managing director at Knight Frank India.

Ram Raheja, director at S Raheja Realty expects housing to emerge as a sought after asset class amid global political crisis.

"Being a tangible asset and safe haven investment, people will continue to divert their funds to real estate," Raheja said.