RBI asks banks not to overstate value of realty

The Reserve Bank of India (RBI) on Friday came hard on banks for overstating realisable value of real estate properties they finance by including charges such as stamp duty and other levies. HT reports.

The Reserve Bank of India (RBI) on Friday came hard on banks for overstating realisable value of real estate properties they finance by including charges such as stamp duty and other levies.

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The RBI said the banks should not include these charges in the cost of the housing property they finance so that the effectiveness of loan to value (LTV) norms are not diluted.

"It has been brought to our notice that banks adopt different practices for deciding the value of the house property while sanctioning housing loans. Some banks include stamp duty, registration and other documentation charges in the cost of the house property," the RBI said in a circular.

The RBI had in 2010 issued guidelines directing the lenders to provide loans only up to 80 % of the cost of property.

As per the rule, a homebuyer will have to arrange at least 20% of the property value on his own before seeking loan from a bank.