National Housing Bank looks to cap loans advanced by housing finance companies
The National Housing Bank (NHB) could be looking to cap the amount of loan that can be advanced by housing financiers against property mortgaged with them, said Sriram Kalyanaraman, chairman of NHB. The decision to cap the Loan To Value Ratio (LTV) in the case of loan against property comes after the portfolio saw sluggish growth and build-up of stress over the past few years.
“LAP (loan against property) especially in mostly high-value loans is based on commercial property which are not appreciating. While you have a value on paper, it might be difficult to repossess and sell it. We would advise caution particularly to medium-sized home loan companies as they might not be able to take the shock if a combination of things goes wrong,” Kalyanaraman added.
Currently, there is no LTV ratio mandated for loan against property. However banks and housing finance companies (HFCs) extend up to 50-55% of the market value of the property as the loan amount. In some cases where lenders take over loans from other lenders, LTV ratio can be as high as 80%.