Loans against residential housing falling under commercial real estate projects will now attract lower provisioning of 0.75 percent against 1 percent earlier, as the Reserve Bank has reduced the provisions on such loans.The RBI has also carved out the residential housing projects under the commercial real estate as a sub-category of the commercial real estate sector."The commercial real estate-residential housing segment will attract a lower risk weight of 75 percent and lower standard asset provisioning of 0.75 percent as against 100 percent and 1 percent, respectively for the commercial real estate segment," the apex bank said in a circular.

 

The RBI directive follows the monetary policy statement on May 3 to carve out a sub-sector of ‘CRE-residential housing’ within the CRE sector as residential housing projects poses lower risk from other commercial estate projects. 

The RBI further said the CRE-RH segment would consist of loans to builders and developers for residential housing projects expect for captive consumption under commercial real estate segment.

 

It added that such projects should ordinarily not include non-residential commercial real estate. "However, integrated housing projects comprising of some commercial space (shopping complex, school) can also be

classified under CRE-RH, provided that the commercial area in the residential housing project does not exceed 10 per cent of the total floor space index of the project." In case the FSI of the commercial area in the predominantly residential housing complex exceeds the ceiling of 10 per cent, the project loans should be classified as CRE and not CRE-RH, RBI clarified.

 

RBI further said that,"…our extant instruction requiring additional risk-weight of 25 percentage points for restructured housing loans and higher provisioning of 2 percent for housing loans extended at teaser rates by banks will continue to remain in force."