NHB Tightens Lending Norms: What It Means for High-Value Home Loan Borrowers

The National Housing Bank (NHB) has raised red flags over housing finance companies (HFCs) that breached the loan-to-value (LTV) norms on big-ticket home loans. Regulators found that some lenders sanctioned loans above ₹75 lakh with LTVs of up to 90%, even though the cap for this category is 75%.

Now, the NHB has directed HFCs to reclassify such loans as non-home loans, bringing stricter compliance into the housing finance space. This has ripple effects across borrowers, lenders, and developers alike.

What Are LTV Norms and Why They Matter

The loan-to-value ratio determines how much of the property’s value can be borrowed through a loan. It is one of the most important safeguards in housing finance, ensuring borrowers don’t take on unsustainable debt while also limiting risks for lenders.

Here’s the regulatory framework:

• Loans up to ₹30 lakh → 90% LTV allowed
• Loans between ₹30–₹75 lakh → 80% LTV allowed
• Loans above ₹75 lakh → 75% LTV allowed

By enforcing these rules, NHB ensures that high-value lending doesn’t push households or lenders into financial instability.

How NHB’s Decision Affects Borrowers

For borrowers seeking home loans above ₹75 lakh, the impact is immediate:

1. Higher Down Payments – Borrowers now have to bring in more personal funds upfront since loans will cover only up to 75% of property value.
2. Tighter Eligibility Checks – Lenders will scrutinize income, creditworthiness, and repayment capacity more closely.
3. Reduced Risk of Over-Leverage – While this may feel restrictive, it protects borrowers from stretching their finances too thin.

At Loan Bazaar, we guide borrowers through these stricter rules, helping them structure their home loans responsibly and within regulatory norms.

How It Affects Housing Finance Companies (HFCs)

For HFCs, the NHB directive means:

• Reclassification of Loans – Risky loans beyond the LTV cap will no longer be counted as home loans.
• Tighter Compliance – Companies will need to align lending policies with NHB’s norms to avoid penalties.
• Lower Risk Exposure – By capping lending, the industry avoids the possibility of rising defaults in high-value segments.

This may slow down disbursals in the luxury home loan segment, but it strengthens the financial system in the long run.

How It Affects Developers and the Real Estate Market

Luxury housing developers will feel the indirect pinch as fewer borrowers qualify for higher-value loans. This could lead to:

• Slower Sales in premium residential projects.
• Increased Demand for Builder Finance as developers seek alternate funding to manage cash flow.

At Loan Bazaar, we offer Builder Finance solutions designed to support developers facing funding challenges, ensuring projects stay on track despite tighter home loan rules.

Broader Industry Impact

As of September 2024, HFCs’ outstanding housing loan portfolio stood at ₹6.25 lakh crore, while the overall industry size was close to ₹34 lakh crore. With exposure this large, even small deviations in lending practices can pose systemic risks.

The Reserve Bank of India (RBI) has also been reinforcing disclosure and compliance measures to ensure long-term stability in housing finance. You can explore RBI’s updates on housing loan regulations here.

Loan Bazaar’s Take

The NHB’s move might tighten access to high-value home loans, but it’s ultimately in the best interest of borrowers and the housing market. By ensuring stricter discipline, it prevents over-leveraging and strengthens trust in the financial system.

At Loan Bazaar, our role is to help you navigate these changes. Whether you’re looking for a home loan, exploring builder finance, or planning your financial future, we make borrowing transparent, compliant, and tailored to your needs.

👉 Learn more about Home Loan solutions with Loan Bazaar.

Conclusion

The NHB’s crackdown on high-value lending beyond the LTV cap reshapes the borrowing landscape. Borrowers must plan for larger down payments, lenders must tighten their compliance, and developers may increasingly rely on builder finance.

For everyone involved, the message is clear: borrow responsibly, stay compliant, and focus on long-term financial health.