Will RBI’s relaxed loan-to-value rules make home loans cheaper?

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RBI has rationalised the risk weights and link them to loan-to-value (LTV) ratios for all new home loans sanctioned up to March 31, 2022. This is expected to make the product attractive for both borrowers and lenders.

According to RBI, retail housing loans will attract a risk weight of 35 per cent, where LTV is less than or equal to 80 per cent and a risk weight of 50 per cent where LTV is more than 80 per cent but less than or equal to 90 per cent.

The linking of the risk weight of home loans to LTV for all new housing loans is a step in the right direction and will benefit the real estate sector. This measure is expected to give a fillip to the industry, as it is expected to result in higher credit flow.

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