No Loan for Property Stamp Duty fees: RBI to Banks

A recent notification from the RBI (Reserve Bank of India) directs banks to exclude stamp duty, registration & other documentation charges while calculating the value of a property could lead to borrowers shelling out more in terms of their own funds.

Buyers of homes in the Rs. 20 lakh to Rs. 60 lakh bracket will get hit further.

RBI said in its notification,'' Many banks and housing finance companies had been adopting different practices to calculate property values while sanctioning housing  loans. Some of them included the cost of stamp duty, registration and other documentation charges in their property value assessment".

RBI added, “This overstates the realisable value of the property as stamp duty, registration and other documentation charges are not realisable and consequently the margin stipulated gets diluted. Accordingly, banks should not include these charges in the cost of the housing property they finance so that the effectiveness of LTV (loan-to-value) norms is not diluted.”

Current RBI regulations permit banks to lend up to 80% of  a housing  loan above Rs. 20 lakh and up to 90% for loans below Rs. 20 lakh.

It will be another blow to the Indian real estate industry, already suffering from falling consumer demand. For house buyers also, the new regulation will add to costs even as borrowing costs and property prices remain high.

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