Assocham ask RBI to increase cap

ASSOCHAM ask RBI to increase the cap on priority sector home loans from Rs 20 lakhs to Rs 40 lakh. The industry body asks RBI to raise the limit in at least the metro cities including Delhi, Mumbai, Chennai and Kolkata as the property prices are increasing at a faster pace in these places.

Assocham stated that, “The housing loan limit classified as priority sector advances should be increased to forty lakh rupees in case of the metro cities, which account for 94 cent of the capital investment made in the sector.”

Recently RBI has announced the priority sector status for housing loans up to twenty lakh rupees. The apex body said: “Loans granted by banks to housing finance companies for on-lending to individuals for purchase/construction of dwelling units may be classified under priority sector, provided the housing loans granted by HFCs does not exceed twenty lakh rupees per dwelling unit each family.”

RBI has also declared four thousand crore rupees refinance facility for the National Housing Bank. Bankers in the industry feel that though RBI has announced a slew of measures to increase the flow of funds to the sagging real estate sector yet there is a need for an adequate support from the government’s side.

On December 7th, when government announced the fiscal stimulus package, it also said that the public sector banks will soon disclose a scheme for home loans up to twenty lakh rupees. Under the new scheme, home loans up to five lakh rupees are expected to be offered at around 7% while those above five lakh rupees and up to twenty lakh rupees may be granted at around 8%.

Bankers also feel that to facilitate credit flow into the cash-strapped real estate sector by the banks, risk weight on such loans need to be reduced. The officials from real estate, steel, cement, automobile and engineering have said that the government’s fiscal stimulus package is ‘highly inadequate’ for generating demand and jobs in the industry.