Reserve Bank of India (RBI) have notified banks not to include the cost of stamp duty, registration charges and other charges while calculating the value of a property for granting home loan. Which simply means, now banks will calculate the value of property on the basis of basic price of the property as other charges like stamp duty, registration charges etc.. will not be part of calculation while calculating the value of property for granting home loan.
This move will lead to reduce the demand of home loans majorly in the lower and medium segment. As currently individuals need to arrange 20% (Down Payment) of the value of property from there own pocket and rest is financed by banks but this notification will make them bear 20% plus stamp duty and registration charges by there own. This move is likely to reduce the number of buyers who buy houses for investment purpose only since the cash required for a house purchase with housing loans will be higher now. This is also likely to reduce the demand of home loans and house purchase which will also cause correction in property prices.
This will also help bankers in reducing their home loans defaulter rate as higher cash is paid by the house buyer and loan amount is reduced, which automatically reduces the EMI for the same property purchase which will decrease the likelihood of housing loan defaults in such home loans.
For Example, Mr. X shorted a house property of Rs. 50 Lakhs
|Basic Price||Rs. 40 lakhs|
|Stamp Duty||Rs. 5 lakhs|
|Registration Charges||Rs. 3 lakhs|
|Other Charges||Rs 2 lakhs|
|Total Value Of Property||Rs 50 Lakhs|
In Current scenario,
Bank will offer 80% of the the total value of property i.e 80% of Rs 50 Lakhs = 40 Lakhs to Mr. X.
Hence Mr. X needs to arrange Rs 10 Lakhs out of his own pocket and bank will finance the rest 40 Lakhs for the purchase of property.
After Implementation Of New Restriction On Home Loan
Bank will exclude the cost of stamp duty, registration charges and other charges from the value of property for the calculation of total value of property for granting home loan.
Hence the total value of property will come to Rs 40 lakhs (Rs 50 Lakhs minus Stamp Duty minus Registration charges minus other charges). Bank will offer 80% of the value of property short listed by Mr. X i.e 80% of 40 Lakhs = 32 Lakhs for the same property.
The implementation of this new rule will reduce the demand of home loan. As due to the constraint added by RBI, banks are going to finance not more than 80% of the basic price of the property irrespective of eligibility of the borrower.
RBI intend to curb speculation from real estate and want only genuine buyers in the property market.