Real estate company shares surged on Wednesday after the Reserve Bank of India announced several measures to improve credit flow to the sector and boost demand. RBI Governor Shaktikanta Das during the monetary policy statement announced measures such as enhancing individual housing loan limits for cooperative banks and allowing rural cooperative banks to lend to commercial real estate projects. These measures announced by the apex bank sparked a rally in shares of DLF, Macrotech Developers, Oberoi Realty, Sobha, Brigade Enterprises, and Godrej Properties, which rose 2-3 per cent.
What Did The RBI Say?
Individual Housing Loans by Cooperative Banks – Enhancement in Limits
Extant guidelines prescribe prudential limits on the amount of individual housing loans that can be extended by Primary (Urban) Co-operative Banks (UCBs), and Rural Cooperative Banks (RCBs – State Cooperative Banks and District Central Cooperative Banks) to their customers. These 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 customer needs, it has been decided to increase the existing limits on individual housing loans by cooperative banks. Accordingly, the limits for Tier I /Tier II UCBs shall stand revised from Rs 30 lakh/ Rs 70 lakh to Rs 60 lakh/ Rs 140 lakh, respectively. As regards RCBs, the limits shall increase from Rs 20 lakh to Rs 50 lakh for RCBs with assessed net worth less than Rs 100 crore; and from Rs 30 lakh to Rs 75 lakh for other RCBs.
“The RBI’s move will help cooperative banks give more housing loans. We continue with our ‘buy’ call on Sobha and Oberoi Realty,” Yash Gupta, equity research analyst at Angel One.
Permitting Rural Co-operative Banks (RCBs) to Lend to Commercial Real Estate
As per the extant guidelines, State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs) are prohibited from extending loans to the commercial real estate sector. Considering the growing need for affordable housing and to realise their potential in providing credit facilities to the housing sector, it has been decided to allow StCBs and DCCBs to extend finance to Commercial Real Estate – Residential Housing (CRE-RH) within the existing aggregate housing finance limit of 5 per cent of their total assets.
Sharad Mittal, Director and CEO, Motilal Oswal Real Estate Funds, said: “In an interesting move, RBI has now allowed rural co-operative banks to lend towards residential housing projects. This will help improve much-needed liquidity in the sector.”
On being asked if it is a good time to invest in realty stocks, Ravi Singhal-vice chairman of GCL Securities said: “No, we believe there is some pain left. However, buying on the dips is a good strategy, and the top picks are Godrej Properties and Suntek Realty.”
The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
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