Loan to Value Ratio (LTV Ratio)

The Loan to Value (LTV) Ratio is a risk assessment metric used by lenders — banks, housing finance companies, and NBFCs — to evaluate the risk of a mortgage or secured loan by expressing the loan amount as a percentage of the appraised market value of the asset being used as collateral. For example, if a property is valued at ₹1 crore and the borrower seeks a loan of ₹75 lakhs, the LTV ratio is 75%. A higher LTV indicates greater leverage and higher lender risk — the lower the borrower's equity cushion, the greater the probability of loss to the lender if the borrower defaults and the property must be sold at a distressed price. The RBI regulates maximum LTV ratios for housing loans — currently up to 90% for loans up to ₹30 lakhs, and up to 80% for larger loans. For investors on Ventura Securities analysing housing finance companies (HFCs), mortgage NBFCs, and commercial real estate lenders, LTV ratios across the loan portfolio are a critical credit quality indicator — high LTV books are more vulnerable to real estate price declines and carry higher NPA risk in downturns.