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Dec 13, 2016

Raising LTV ratio to affect three-wheelers Featured

Economists say three wheelers will become a thing of the past once the budget proposal to raise the loan to value ratio (LTV) from 30 per cent to 75 pc is implemented.

tw1Previously, a three wheeler worth Rs. 650,000 could have been purchased by paying 30 pc of its value, or Rs. 200,000, to a bank or a financial institution and the balance 70 pc to be paid on lease.

However, budget 2017 has brought that down to 25 pc, and on top of that, a 15 pc of production and carbon emission taxes imposed.

Therefore, 75 pc of the value of a three wheeler, or more than Rs. 500,000 will now have to be paid by the buyer.

Economists say this will adversely affect the small time, self-employed businessmen who use three wheelers, also because a three wheeler has a life span of around three to five years only.

What associations & sellers don’t understand

The plight of three wheeler owners has been further aggravated due to the two associations which represent them having become mere political stooges, they point out.

These associations are having a narrow-minded belief that a reduction in the sale of three wheelers as a result will benefit three wheeler taxis.

However, they are yet to become convinced of the plight they themselves would face when they want to buy a new three-wheeler, economists say.

Soon after the budget proposal was made, the sale of three wheelers has seen an increase, and the leading importers and distributors such as David Peiris are yet to understand the adverse effect that will have on their market.

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