RBI has increased the existing limits on individual housing loans by cooperative banks. The increased limits will apply for both Primary (Urban) Co-operative Banks (UCBs), and Rural Cooperative Banks (RCBs).
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The limits for Tier I or Tier II Urban Co-operative Banks will stand 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. As regards RCBs, the limits shall increase from Rs 20 lakh to Rs 50 lakh for Rural Cooperative Banks with assessed net worth less than Rs 100 crore; and from Rs 30 lakh to Rs 75 lakh for other Rural Cooperative Banks. RCBs 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. Taking into account the increase in housing prices since the limits were last revised and considering the borrower’s needs, it has been decided by RBI to increase the existing limits.
The borrowers are eligible for housing finance for Construction / purchase of houses / flats by individuals or for Repairs, alterations and additions to houses / flats by individuals.
Housing loans may be repayable within a maximum period of 20 years, including moratorium or repayment holiday. The moratorium or repayment holiday may be granted at the option of the beneficiary, or till completion of constructions, or 18 months from the date of disbursement of first instalment of the loan, whichever is earlier.
In order to make housing finance affordable, banks may consider fixing the installments on a graduated basis, if there is reasonable expectation of growth in the income of the borrower in the coming years.
Graduated basis means fixing lower repayment installments in the initial years and gradually increasing the installment amount in subsequent years coinciding with expected increase in income in subsequent years.
In view of the higher risks associated with a lump-sum disbursal of sanctioned housing loans and customer suitability issues, UCBs have been advised that disbursal of housing loans sanctioned to individuals should be closely linked to the stages of construction of the housing project / houses and upfront disbursal should not be made in cases of incomplete / under-construction / green field housing projects.