Home Loans up to Rs. 35 Lakh Must Get Priority Sector Tag: IBA Committee


Several Banks want strategic changes in regulations, including revision in the definition of housing loans under priority sector & reduction in margin requirement for buying a home, to give fillip to the housing sector.

Indian Banks’ Association Committee..!

Given the increase in property prices in the past few years, an IBA's (Indian Banks’ Association) committee has recommended to the Finance Ministry that home loans up to Rs. 35 lakh (Extant limit: Rs. 25 lakh) should get the priority sector tag.

The move will lead to banks providing loans to home buyers at affordable interest rates, said the committee on housing sector.

This will also benefit a large group of customers in Tier- II & Tier- III cities. Further, real estate loans to builders /developers / promoters constructing affordable homes costing within Rs. 35 lakh a house (unit) could be classified as priority sector.

Builders / developers can then get loans at preferential interest rates, thereby accelerating housing projects in segments where the unit (house) cost does not exceed Rs. 35 lakh.

What is Priority Sector Loan?

Loans (up to a certain limit) given by banks to categories such as agriculture, micro & small enterprises, micro credit, education loans, housing loans, export credit & weaker sections are classified as priority sector lending.

The IBA''s committee observed that customers were finding it difficult to stump up 20% margin as well as pay for stamp duty & registration, and other charges, which aggregate to as high as 25 to 30% of the value of house property.

In order to mitigate this, the committee is of the view that banks should fund up to 85%of the cost of house, that is reduce margin from 20% to 15%.

Bringing down the margin would increase the ability of customers to buy houses.

Historically, housing and plot of land property has indicated a rising trend, which would result in better loan to value ratio (The amount of loan given by the bank / value of property) in subsequent times, said the IBA committee.

IBA (Indian Banks' Association)
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Web : www.iba.org.in 


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