Banks more risk-tolerant in housing loans but affordability worsened, shows RBI survey

A recent survey by the Reserve Bank of India (RBI) shows that banks are getting more risk-tolerant in housing loans but affordability across the country has worsened over the past four years.

"The median loan-to-value (LTV) ratio moved from 67.7 to 69.6 between March 2015 and March 2019," said the Residential Asset Price Monitoring Survey adding that "banks have become increasingly risk-tolerant."

The RBI has been conducting a quarterly residential asset price monitoring survey since July 2010 on housing loans disbursed by select banks and housing finance companies across 13 cities: Mumbai, Chennai, Delhi, Bengaluru, Hyderabad, Kolkata, Pune, Jaipur, Chandigarh, Ahmedabad, Lucknow, Bhopal and Bhubaneswar.

By March-end, said the latest survey, housing finance companies were willing to take more risk as they were ready to offer an LTV ratio of 72. For the most part of March, housing finance companies were willing to offer an LTV of 75.

Even as median EMI-to-income ratio has remained relatively steady, Mumbai, Pune, and Ahmedabad recorded higher share of EMI-to-income ratio. This is because these three cities are also the costliest in terms of buying a house.

With a median 74.4 months' salary required to buy a house, Mumbai remains the least affordable city in the country while Bhubaneswar is the most affordable with the median house price-to-monthly income (HPTI) ratio of 54.3.

The housing affordability worsened over the past four years as the HPTI ratio increased from 56.1 in March 2015 to 61.5 in March 2019 generally for cities in India. "The movement of median loan-to-income ratio also confirms worsening housing affordability as it moved from 3 in March 2015 to 3.4 in March 2019," the survey showed.