What is Affordable Housing Loans?

 In a bid to boost the housing sector, The Reserve Bank of India (RBI) said loans upto Rs. 50 lakhs in metros and Rs. 40 lakhs in other centers will be considered as affordable housing loans.

Under the current regulatory regime, loans given by banks to individuals up to Rs. 25 lakh in metros and Rs. 15 lakh in non-metros  for purchase / or construction of a dwelling unit, per family, are considered as affordable housing loans. These loans fall under the priority sector lending category for banks.

The treasury head of a public sector bank said that “interest rates could come down on affordable loans given out of the proceeds of long-term bonds”.

While tweaking the affordable housing definition, the RBI said the cost of a house can not exceed Rs. 65 lakh and Rs. 50 lakh in the metros and non-metros, respectively. There are six metros in the country: Mumbai, Chennai, Kolkata, Delhi, Hyderabad and Bangalore.

The RBI said that it will periodically review the definition of affordable housing, on account of inflation.

To give a further boost to lending for affordable housing, the RBI also exempted the money raised through these long-term bonds from Cash Reserve Ratio and Statutory Liquidity Ratio requirements.

This means that banks will be able to commit the entire corpus of funds raised through the issue of such bonds for the purpose of affordable housing.

Long-term bonds can be issued with a fixed or floating rate of interest. The floating rate of interest will be linked to market determined benchmark rates.

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