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Housing price inflation cools after FY13 highs

The Reserve Bank of India has prescribed an upper limit of 80 per cent on LTV for housing loans above Rs 20 lakh and 90 per cent for housing loans up to Rs 20 lakh, respectively.

By: ENS Economic Bureau | Mumbai |
May 8, 2015 2:48:31 am

House price inflation which was at its peak during 2012-13, has stabilised in the recent period, a Reserve Bank of India (RBI) study has said.

The house price inflation, as measured by the annual growth rate in Residential Property Price Index (RPPI), increased gradually from about 4 per cent in the first quarter of 2011-12 to almost 28 per cent in the third quarter of 2012-13.

However, the trend reversed thereafter and it slid below 4 per cent in the third quarter of 2014-15, according to the RBI study.

“House price inflation in most cities witnessed peak during quarters of 2012-13. House price inflation for small, medium and large houses also followed a similar path, though no specific pattern was observed in relative movement of house price inflation in these size-classes,” said the study ‘Recent trends in residential property prices in India’.

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Housing market witnessed an upward trend during the past four-and-half years, evident from steady rise in RPPI from 107 in first quarter of 2010-11 to 172 in third quarter of 2014-15, an increase of almost 61 per cent.

The highest growth in Residential Property Price Index was recorded in Jaipur at around 78 per cent, whereas the lowest growth was recorded in Greater Chandigarh and Hyderabad at around 40 per cent, over this period.

According to the RBI, a decreasing trend was observed in median loan-to-value (LTV) ratio over the quarters, indicating increased cautiousness of banks in sanctioning housing loans.

Loan-to-value ratio is a macro-prudential tools used by banks to control their exposure to decline in house prices.

The Reserve Bank of India has prescribed an upper limit of 80 per cent on LTV for housing loans above Rs 20 lakh and 90 per cent for housing loans up to Rs 20 lakh, respectively.

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