RMA revises directives on housing loans

Royal Monetary Authority ( RMA)

SHERAB DORJI

Thimphu

The Royal Monetary Authority (RMA) in an effort to ease the burden for repayments on housing loans on both commercial and residential purposes has increased the loan repayment term to 30 years from the existing 20 years.

This is in line with the Covid-19 crisis, whereby the government has come up with many monetary measures in order to remain resilient during such hardship times.

According to the press release on revision of directive on housing loans the ‘Directives on housing (commercial and home) loans, vehicle loans and personal loans 2021’ was approved during its 181st board meeting of RMA which was held on 27 August.

The directives were approved as a measure to promote home ownership, housing affordability and availability, and further reduce rental burden.

This is also to incorporate the loan term for commercial housing loan and house loan from twenty years to thirty years excluding the gestation period. Further, the existing housing loans both for commercial and home will also be eligible for the extension of the loan term by the remaining period.

The maximum loan to value ratio for commercial housing loan is also enhanced from 70 percent to 80 percent for the loan amount up to Nu 50-million (M) and from 60 percent to 70 percent for the loan amount more than Nu 50-M.

The maximum loan to value ratio for home loan is also enhanced from 80 percent to 90 percent. Further, this is to encourage financial institutions to finance home loans, the risk weight for home loans which are over due by 90 days and less is relaxed from 100 percent to 50 percent.

The press release also states that the relaxation in the risk weight will help in freeing up capital charge on home loans which are required to be maintained as part of the regulatory capital.

According to the press release, the housing sector accounted to 26 percent of the total loan portfolio of Nu 174.92-billion as of June 2021.

According to an official from RMA, “The directives on vehicle loans and personal loans remains same as that of the previous directives on housing (commercial and home) loans, vehicle loans and personal loans 2018, only the directives on housing loans, vehicle loans and personal loans 2021 has been derived and approved.”  

An official further added that during this pandemic, they hope that the land lords will look into consideration as the loan repayment period has been increased from 20 years to 30 years.

As per the directive on housing including loan for commercial and home, vehicle and personal loans 2018, the loan to value (LTV) ratio for services oriented vehicles like buses was 50 percent.

Whereas the directives on commercial and home loans, vehicle loans and personal loans 2021, which includes electric vehicle and passenger buses where the LTV ratio is 70 percent.

The term for repayment period of vehicle loan is five years whereas electric vehicles and passenger buses has a maximum loan term of seven years.

For the personal loan the maximum loan limit is Nu 5 00, 000 with a minimum loan term of five years.

Meanwhile, with the fact that due to the prolonged impact of lockdown in the country, the RMA will immediately enhance the revised directives.    

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