Tougher lending norms for housing finance firms

Tougher lending norms for housing finance firms

Bangalore: India’s housing regulator has tightened lending norms governing housing finance companies, a move likely to hurt borrowers across sectors, the agency said on its website.

The National Housing Bank has mandated housing finance firms to keep aside 0.4% of the total outstanding loans, excluding individual housing loans, by September 2011.

“We want them (housing finance firms) to build up adequate capital reserves for that segment, which can be very volatile and prone to risk," National Housing Bank chairman and managing director RV Verma told the Economic Times, explaining the reason for the new rules.

The new rules also limit the amount a person could borrow against property to 90% where the value of the property is less than Rs20,00,000 ($44.2 million). There was no limit earlier.

All other loans against property have been capped at 80 percent of the property’s value.

The National Housing Bank was not immediately available for comment.