RBI has increased existing limits on individual home loans by co-operative banks. The increased limits will apply to both Primary (Urban) Cooperative Banks (UCBs) and Rural Cooperative Banks (RCBs).
Limits for Tier I or Tier II urban cooperative banks will be revised from Rs 30 lakh (Tier I) or Rs 70 lakh (Tier II) to Rs 60 lakh (Tier I) or Rs 1.4 crore (Tier II) respectively. With regard to RCBs, the limits will increase from Rs 20 lakh to Rs 50 lakh for rural cooperative banks with an assessed net worth of less than Rs 100 crore; and from Rs 30 lakh to Rs 75 lakh for other rural cooperative banks. BRCs can be both state cooperative banks and district central cooperative banks.
The limits were last revised for UCBs in 2011 and for RCBs in 2009. In view of the increase in house prices since the last limit revision and in consideration of the needs of the borrower, it was decided by RBI to increase the existing limits.
Borrowers are eligible for housing finance for construction/purchase of houses/apartments by individuals or for repairs, alterations and additions to houses/apartments by individuals.
Home loans can be repaid within a maximum period of 20 years, including a moratorium or repayment holiday. The moratorium or repayment holiday may be granted at the choice of the beneficiary, or until the completion of the constructions, or 18 months from the date of disbursement of the first installment of the loan, whichever comes first.
In order to make housing finance affordable, banks may consider setting installments on a phased basis, if there is a reasonable expectation of growth in the borrower’s income in future years.
A graduated basis means setting lower repayment payments in early years and gradually increasing the amount of payments in later years, coinciding with the expected increase in income in later years.
Considering the higher risks associated with lump sum disbursement of sanctioned housing loans and client adequacy issues, UCBs were advised that the disbursement of sanctioned housing loans to individuals should be closely linked to the construction stages of the housing project/houses and no upfront disbursement shall be made in cases of incomplete/under construction/greenfield housing projects.