Property Plus

Game changers

Major players in the field of lending for housing in India have been Public Sector Banks (PSBs). A couple of large private sector banks like ICICI Bank and other financial institutions like LIC Housing, Canfin Homes, India Bulls, and Tata Housing also have created noticeable ripples in the arena. In the new millennium, a couple of foreign banks like Citibank used to extend ‘all in one’ products wherein running accounts were offered for both deposit and borrowing monies whereupon interest was charged on the net drawn balance only.

The SBI, the largest lender, has been aggressive ever since it started offering housing loans. Around 2008-2009, it came up with the ‘teaser loans’ with universally low rates of interest, in order to revive demand for loans in the wake of the global economic slowdown, about which the Reserve Bank pointed a finger or two. In recent times, the SBI has also formulated plans such as SBI Max Gain, an overdraft facility; SBI Yuva Home Loan to those between 21 and 45 years of age; SBI Realty for purchasing plots; SBI Tribal Plans, amounts up to Rs. 10 lakh for which no mortgage is insisted upon; and Gram Nivas - loan for rural areas with a ceiling of Rs. 5 lakh.

A few months ago, ICICI Bank launched the country’s first mortgage guarantee-backed housing loans to retail customers who went in for the first home, that too, in the affordable segment. Christened the “ICICI Bank Extraa Home Loan”, this product has special features including ceiling of Rs. 75 lakh, option for repayment up to 67 years of life, and provision for enhancement in the loan amount up to 20% . Another first was that the India Mortgage Guarantee Corporation (IMGI), a joint venture of NHB, Glenworth Financial, International Finance Corporation and ADB, undertook to guarantee these loans. A onetime guarantee fee depending on pre-determined factors will be charged.

For small borrowers

Another quiet entry into the field recently has been that of Fullerton India Housing Finance Company, which is a part of Singapore’s TEMASEK Group. This non-banking finance company started extending housing loan mainly to small borrowers, ranging from Rs. 50,000 to Rs. 10 lakh. The main target groups are salaried class and self-employed individuals. The next substantial category are agriculturists and allied agricultural workers. The annual gross household income for eligibility is Rs. 1.20 lakh.

This new initiative will offer home loans under its “Grihashakti” brand. Both home and commercial space will be eligible for the loan assistance. The average size of credit limit may range from Rs. 7 lakh to Rs. 10 lakh. Purchase and self-construction will fall under the eligibility category. In the case of purchase, 70% of market value and for construction, 80% of estimated cost of construction will be financed, subject to other terms and conditions. Cost of land, stamp duty, registration charges and onetime acquisition cost will also be considered for computing the cost. The tenure of the loan is set at a ceiling of 10 years.

Housing for all by 2022.

The four pillars of this programme being implemented by the Central Government are:

Fine-tuning slum development

Affordable housing

Subsidy support for construction by individuals

Up-front subsidy to reduce EMI.

In the present changing rural landscape, BPL families need to be attracted in large numbers. A revolving/rolling drawing power facility could perhaps be ideal for meeting the ongoing maintenance cost, which may also add some shine and glitter to the home loan sector. The scope for increased contribution by the housing sector to the GDP, which is only around 10 per cent in India as of now, compared to over 60% in the U.S., 80% in the U.K. and around 20% in China, needs to be the driving force behind all innovations in the home loan field.

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Printable version | Feb 28, 2021 1:28:01 PM |

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