“In our experience, the losses on their lap are considerably lower compared to home loans, especially since transaction risks are usually higher in home financing,” one of the two officials who are aware of the development. “Risk for lap should ideally be lower or, at least on the same footing with housing loans.
In their discussions with the Reserve Bank of India (RBI), non-bank financial companies have asked not to be treated on the same rate with uncovered loans when allocating risk weights. At the RBI they have urged the current cap of 125% and connect more closely with housing loans, which attract risk weights in the reach of 35% to 50%.
“There is no justification to compare them with the risk weights that are applied to personal or unsecured business loans,” said the first official mentioned above. NBFCs have also urged loan-to-value (LTV) to regularize ratios on their lap with housing loans. Currently, LTVs can vary from 80-90%on home loans, but for the lap the range is 50-75%.
NBFCs have insisted on the central bank to make refinancing of self -construction loans possible in cases where the construction has already been completed more than 50%.
No implementation risk
“The loan against real estate is a safer undertaking compared to home loans because it is supported by completed property, while home loans often wear the completion risk when the property is still under construction,” said the second civil servant mentioned above. “The title deed for round is available in advance. For home loans in markets such as Delhi-NCR, the title deed is often only performed after completion, which is a risk if the project remains unfinished.”
NBFCs have also insisted on the RBI to guarantee a level playing field in the enforcement of Sarfaesi (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) provisions.
Currently, home financing companies (HFCs) are allowed to call Sarfaesi for exposure of loans above? 1 Lakh, while for NBFCs the threshold is considerably higher? 20 LAKH. Industrial players claim that this inequality places NBFCs to the disadvantage and has asked for the? 1 lakh -threshold uniform to be applied. They claim at least, loans paid by NBFCs, should under the? 1 Lakh are eligible to make more effective recovery possible.
NBFCs have also asked to revise the calculation method for the most important company criteria (PBC), which suggests that it is based solely on loan substances, rather than the total balance size.
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