The RBI Hikes the Home Loan Limits Under PSL By 25 percent
The affordable housing segment has much to cheer about with the Reserve Bank of India (RBI) in the last week raising the home loan limits under Priority Sector Lending (PSL) by 25 percent. The RBI hikes the home loan limits under PSL in its policy decision to give a fillip to the low-cost housing for the Economically Weaker Sections and Lower Income Groups.. It has decided to revise the housing loan limits for eligibility from Rs 28 lakh to Rs 35 lakh in metropolitan cities, and from existing Rs 20 lakh to Rs 25 lakh elsewhere.
However, the overall cost of the dwelling unit in the metropolitan cities (with a population of ten lakh and above) and at other centers should not exceed Rs 45 lakh and Rs 30 lakh respectively to qualify for this benefit, RBI said in its statement. The RBI added that a circular on the subject would be issued by the end of this month.
The affordable housing segment will get a boost with RBI raising the loan limits under Priority Sector Lending (PSL). As per the new policy announcement, home loans up to Rs 35 lakh in metro cities and Rs 25 lakh in other centers will now qualify for benefits under PSL. Earlier, housing loans up to Rs 28 lakh in metro cities and Rs 20 lakh at other places were only eligible for these benefits. Therefore, the decision to increase the limit would be a big boost for the affordable home buyers.
The increase in home loan limits under Priority Sector Lending may make such bank loans cheaper. It will be beneficial for prospective home buyers to avail home loans under PSL as the interest rates on these loans may cost less. Besides, they can avail subsidy benefits of Rs 2.68 lakh from the central government under schemes like Pradhan Mantri Awas Yojna.
Loans given under PSL are less expensive than those provided by the banks in their ordinary course. Banks will welcome this move as they usually struggle to meet their priority sector lending targets. Generally, banks lend more to those priority sectors where default rates are low and this allow them to achieve better yield and asset quality. The default rate in housing loans in the range of Rs 10 lakh to Rs 35 lakh is comparatively low. Therefore, the RBI’s decision would prompt banks to lower rates in the affordable home loan segment to increase market share.
In fact, apart from home buyers, the revision in housing loan limits for PSL is a major incentive both for the home loan borrowers as well as banks. This would also benefit the builders who are actively catering to this segment. It would also encourage many more developers looking at catering to this segment.
Therefore, this would give a boost to the affordable housing real estate sector and help in economic growth. Moreover, this is a good step towards achieving the government’s objective of ‘Housing for All’ by 2022 as owning a house will soon become a reality for many people who dream to have their own home.
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The RBI Hikes the Home Loan Limits Under PSL By 25 percent

Ajay Verma is a founder and writer of The Housing World, a real estate and mortgage news website. He brings with him 20+ years of rich experience in the real estate and mortgage industries. He has worked in senior roles in Delhi and NCR in the above-mentioned sectors.