However, the loan-to-value ratio (LTV) could be 90 percent in case the value of loan is below Rs.2 million, said the country’s apex bank.

“At present, there is no regulatory ceiling on the LTV ratio in respect of banks' housing loan exposures. In order to prevent excessive leveraging, the LTV ratio in respect of housing loans hereafter should not exceed 80 percent,” the central bank said.

Raising concern on the teaser rates in the home loan market, the central bank said some borrowers may find it difficult to service the loans once the normal interest rate, which is higher than the rate applicable in the initial years, becomes effective.

The RBI said that many banks, at the time of initial loan appraisal, do not take into account the repaying capacity of the borrower at normal lending rates.

“Therefore, in view of the higher risk associated with such loans, the standard asset provisioning on the outstanding amount has been increased from 0.4 percent to 2 percent with immediate effect. The provisioning on these assets would revert to 0.4 percent after one year from the date on which the rates are reset at higher rates if the accounts remain ‘standard,’” the RBI notification said.

Some banks including ICICI Bank, HDFC has already withdrawn their teaser rates scheme while State Bank of India's scheme would continue till this month.

The announcement follows the concerns expressed by RBI Governor D Subbarao in his half-year review of the monetary policy in October. The decision, the RBI said, is aimed at “preventing excessive speculation in the high value housing segment.”

Home buyers now must pay a margin money of at least 20 percent of the value of the property for loans up to Rs.2 million, a buyer will be allowed to get loan by paying at least 10 percent of the value of the property.

In another development, the country’s apex bank said that the risk weight for residential housing loans of Rs.7.5 million and above will be 125 percent, irrespective of the LTV ratio, to prevent excessive speculation in the high value housing segment.

In May 2008, the RBI had stated that the risk weights on residential housing loans with LTV ratio up to 75 percent will be 50 percent for loans up to Rs.3 million and 75 percent for loans above that amount.

In case of LTV ratio of more than 75 percent, the risk weight of all housing loans, irrespective of the amount of loan, will be 100 percent.

Some banks are following the practice of sanctioning housing loans at teaser rates i.e. at comparatively lower rates of interest in the first few years, after which rates are reset at higher rates.

“This practice raises concern as some borrowers may find it difficult to service the loans once the normal interest rate, which is higher than the rate applicable in the initial years, becomes effective,” the RBI said.

It has been also observed that many banks at the time of initial loan appraisal, do not take into account the repaying capacity of the borrower at normal lending rates, the central bank cautioned.