As the RBI announces measures to improve credit in the sector, the price of real estate rises; get t

As the RBI announces measures to improve credit in the sector, the price of real estate rises; get t

Following the Reserve Bank of India’s announcement of multiple initiatives to enhance credit flow to the industry and increase demand, shares of real estate companies rose on Wednesday. In the monetary policy statement, RBI Governor Shaktikanta Das announced changes to cooperative banks’ housing loan restrictions and the ability of rural cooperative banks to finance commercial real estate projects. The top bank’s actions caused a 2-3% increase in the share prices of DLF, Macrotech Developers, Oberoi Realty, Sobha, Brigade Enterprises, and Godrej Properties.

What Did The RBI Say?

Individual Housing Loans by Cooperative Banks – Enhancement in Limits

The quantity of individual home loans that Primary (Urban) Co-operative Banks (UCBs) and Rural Co-operative Banks (RCBs – State Cooperative Banks and District Central Cooperative Banks) may offer to their clients is capped according to current regulations. For UCBs and RCBs, these restrictions were last modified in 2011 and 2009. It has been determined to raise the current limitations in light of the rise in housing costs since the limits were last amended and taking customer needs into account. constraints placed by cooperative banks on individual home loans. In light of this, the Tier I and Tier II UCB limits would be changed from Rs 30 lakh to Rs 70 lakh to Rs 60 lakh and Rs 140 lakh, respectively. For RCBs having an assessed net value of less than 100 crore rupees, the restrictions will rise from Rs 20 lakh to Rs 50 lakh, and from Rs 30 lakh to Rs 75 lakh for other RCBs.

The RBI’s action will enable cooperative banks to extend more mortgages. Our “buy” recommendation for Sobha and Oberoi Realty remains in place, according to Yash Gupta, an equity research analyst at Angel One.

Permitting Rural Co-operative Banks (RCBs) to Lend to Commercial Real Estate

According to the current regulations, loans from State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs) cannot be given to the commercial real estate industry. It has been decided to permit StCBs and DCCBs to extend finance to Commercial Real Estate – Residential Housing (CRE-RH) within the existing aggregate housing finance limit of 5% of their total assets to address the growing demand for affordable housing and to realize their potential in providing credit facilities to the housing sector.

Motilal Oswal Real Estate Funds’ Sharad Mittal, Director, and CEO commented: “In an intriguing step, RBI has now permitted rural co-operative banks to lend into residential housing projects. This would enhance the sector’s desperate demand for financing.”

In response to the question of whether now is a good time to buy real estate equities, Ravi Singhal, vice chairman of GCL Securities, responded, “No, we think there is still some pain remaining. The best choices for buying on the dips, though, are Godrej Properties and Suntek Realty.”

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