Loan terms eased for cheaper flats

RBI has said that banks can extend loans to cover 90% of a property's value if the loan in question does not exceed Rs 20 lakh. Now you need to shell out less as down payment for a home that costs Rs 22 lakh or less.

The Reserve Bank has eased home loan terms for those going in for smaller or cheaper flats. It has said that banks can extend loans to cover 90% of a property's value if the loan in question does not exceed Rs 20 lakh. Now you need to shell out less as down payment for a home that costs Rs 22 lakh or less.

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The change in RBI rules came on Thursday nearly two months after its announcement on November 2.

This is meant to boost real need for homes and curb speculation by those taking big loans with smaller upfront payments.

"For small value housing loans (up to Rs 20 lakh), it has been decided that the LTV ratio should not exceed 90%," said RBI on Thursday.

With this relaxation, an individual buying a property worth Rs 20 lakh can get a loan of up to Rs 18 lakh as against Rs 16 lakh that he could get earlier. He would now need just Rs 2 lakh as down-payment as compared to Rs 4 lakh he had to shell out earlier.