What changed
The Master Circular updates the previous version dated July 1, 2006, incorporating instructions from circulars listed in the appendix and clarifications issued during the year. It consolidates all current instructions on housing finance into a single document, effective from July 2, 2007.
What it means for you
Banks now have a single reference for all housing finance guidelines, reducing ambiguity. The circular reinforces the need for orderly growth in housing loan portfolios and ensures compliance with priority sector norms. It also clarifies eligible direct and indirect housing finance activities, including second homes and rental properties.
What you must do
- Review and update your bank's housing finance policies to align with the revised Master Circular.
- Ensure all direct and indirect housing finance activities comply with the definitions and conditions outlined.
- Verify that housing loans under priority sector meet the specified criteria and reporting requirements.
- Check risk weight and real estate exposure limits as per the circular's sections.
Who it affects
All Scheduled Commercial Banks (excluding RRBs)
What is the effective date of this Master Circular?
The circular is dated July 2, 2007, and updates instructions up to June 30, 2007.
Does this circular allow banks to finance the purchase of a plot only?
Yes, banks can finance plot purchases if the borrower declares intent to construct a house within a period set by the bank.
Are banks allowed to finance second homes or rental properties?
Yes, the circular permits finance for a second house for self-occupation and for rental properties if the borrower is posted elsewhere or has employer-provided accommodation.