Latest Property News on 'Home Loans'

RBI Expresses Concern Over Home Loan Rates

India’s banking regulator — the Reserve Bank of India (RBI) — has expressed concern on banks offering home loans with teaser rates, or schemes where monthly instalments rise after the initial years. Its worries stem mainly from the fear that borrowers may subsequently find it tough to repay the loans once interest rates go up after the first couple of years during which the rates are pegged at a fixed rate. “Teaser rates are increasingly being offered which is a cause for concern,” said Usha Thorat, deputy governor, RBI, at a banking conference here. “I hope banks are ensuring that borrowers are well aware of the implications of such rates and the appraisal takes into account repaying capacity of the borrowers when the rates become normal.”

RBI’s concern can perhaps be traced to the fact that the genesis of the mortgage crisis in the US lay in home loans extended to borrowers who struggled to repay. These loans, popularly known as sub-prime loans because they were given to people in lower income groups, included so-called adjustable rate mortgages where the repayment is low in the initial months with instalments rising in subsequent months, somewhat similar to teaser rates. Read More »

Major Banks Reject RBIs Proposal of Uniform Home Loan Rates

Driven by angry mortgage borrowers, RBI has once again nudged top banks to charge lower home loan rates to old customers instead of just using the lower interest rates to pull new borrowers. But lenders continued to resist the proposal, citing cost mismatch. The contentious issue cropped up when CEOs of large banks met senior RBI officials on Thursday to suggest possible measures that the central bank could consider for the January 29 monetary policy.

At the meeting, RBI deputy governor KC Chakrabarty reminded bank chiefs that the regulator had earlier voiced its concern over banks’ inability to pass on the benefit of lower interest rates uniformly to all customers. It has been a common refrain among home loan borrowers that while banks are slow to pass on a rate cut, they are quick to hike either the loan term or the EMI (or equated monthly instalments) when rates go up. Read More »

SBI Chairman Defends 8% Home Loan scheme

The latest ‘teaser’ from the Reserve Bank of India hasn’t amused Om Prakash Bhatt, chairman of State Bank of India, the bank that pioneered limited-period soft terms for home loans. “I don’t know what the RBI means by teaser loans,” Bhatt retorted minutes after deputy governor Usha Thorat expressed concerns over ultra-low rates offered by banks to attract home loan takers. It is not right to refer to the 8% home loan scheme as ‘teaser’, Bhatt said.

Ironically, it is for the third time in the recent past that SBI is finding itself on the opposite side of the table with the RBI, technically its former owner. Bhatt also defended his scheme and said “there are no hidden costs in these loans or any add-backs.” SBI, the country’s largest lender, apparently is not happy with the stance the central bank has taken on the provision coverage ratio and expansion of the held-to-maturity category for accounting banks’ investments. Bhatt justifies the bank’s provision coverage ratio of about 40% as being safe enough, even as the RBI wants all banks to have a minimum provision cover of 70% to make banks financially more sound. Sources say SBI wanted the held-to-maturity category to be expanded, but RBI shot down those requests. Read More »

Amidst Banking Slowdown ICICI Keeps Faith on Home Loan Segment

ICICI Bank is optimistic about home and auto loans amidst slowdown in the banking industry. The bank’s deputy managing director, Sandeep Bakshi, said, “On quarter-on-quarter basis, in the first two quarters, our home loan portfolio has shown an improvement.’’ However, talking on corporate loan, Bakshi said actual disbursements happen after a lag because these projects get implemented over a period of time.

In contrast, retail loans like auto disbursement happen immediately. Even home loan disbursement, unless it is a cash out deal like second house purchase or direct purchase from the builder, it takes some time for the disbursement, said Bakshi. The bank is likely to announce its third quarter results on January 21.

Axis Bank to Offer Home Loans at 8.25 pc Irrespective of Loan Amount for 2 Years

Two months after it launched the 8 per cent home loan offer, leading private sector lender, Axis Bank on Tuesday came with a special scheme to give home loans at 8.25 per cent fixed rate for the first two years irrespective of loan amount. This scheme is open till March 31, 2010. After the offer period, floating rate of interest will be applicable based on the mortgage reference rate.

Home Loan Segment- 2009 was Good, 2010 can be Better

The year 2009 was a good one for home loan borrowers. Banks rolled out the goodies for them in the form of low interest rate offers and special home loan packages. Stable property prices also helped. So, the demand for home loans was steady. With the economy poised for strong growth and confidence returning to the capital market, most players expect the demand for home loans to grow in 2010. Bankers expect disbursements to be around 25 per cent higher next year. The first half of 2009 saw a deceleration in the housing loan segment due to a combination of reasons including the overall economic slowdown, high property prices and high interest rates. According to the Reserve Bank of India’s Macroeconomic and Monetary Developments Second Quarter Review 2009-10, as on August 28, 2009, the year-on-year growth in home loans was 5.4 per cent, against 12.4 per cent as on August 29, 2008.

In absolute terms, the growth in housing loans was Rs 14,668 crore in August 2009, against Rs 29,872 crore in August 2008. But the home loans segment weathered the economic slowdown better than other segments due to the Government’s stimulus packages and a correction in property prices. According to Mr R.R. Nair, Director and Chief Executive, LIC Housing Finance, 2009 was a rewarding year for his company, with disbursements growing by 70 per cent and approvals by 90 per cent. From the industry point of view, it was a mixed experience, he said. Home loan growth in the second-half of 2008-09 was weighed down by a combination of factors such as the economic slowdown, high interest rates, high property prices and a lack of confidence among buyers, who were not sure of their jobs and, therefore, their incomes, said Ms Renu Sud Karnad, Managing Director, HDFC Ltd. In fiscal 2009-10, so far the growth in disbursals has been about 26 per cent for HDFC. Read More »

SBI Confirms Stability in Home Loan Rates

The State Bank of India (SBI) does not foresee any immediate change in lending rates. SBI chairman .P. Bhatt, who was in the city today, said the bank’s initiative in the home loan segment had helped both customers and real estate developers.

“We reduced the home loan lending rates to 8 per cent per annum and as a result developers and customers started returning to the market. Other banks were also forced to follow our footsteps,” Bhatt said. Read More »

NRIs and Home Loan India

Indians living abroad are equally eligible for housing loans from banks in India, but with some riders. Christmas and New Year see an influx of Indians based abroad. This year is no different. This time, though, the non-resident Indians (NRIs) are taking a closer look at real estate here. The correction in property prices has induced many, who aim to return to India in the near future.

An NRI is an Indian citizen, holding a valid Indian passport and staying abroad for employment, business or vocational purposes. According to the Reserve Bank of India and the Income Tax Act, an NRI can buy real estate in India and avail housing loans on residential properties from banks. They are only denied purchase of agricultural land, farm house or plantation property in the country. Calculation of eligibility and interest rate for NRI loans is not very different from that of the Indian residents. Read More »

UBI Comes up with 8% home Loan Scheme

The city-based state-run United Bank of India (UBI) has launched an eight percent home loan scheme available till March 31 next year, a release said here on Tuesday. The bank would charge eight percent interest on home loan for the first year and nine percent for the second to fourth years. From the fifth year onwards, it would charge interest on a floating basis, which would be two percent less than the benchmark prime lending rate (BPLR) prevailing at that time, the release said. Under fixed rate, the bank would charge one percent less than the BPLR and the interest rate would be revised every five years, it said. ‘United Bank of India announced reduction in interest on ‘Car Loans’ by one percent on the card rates up to December 31, 2009, and to add to the toppings, it also announced waiver of processing fees on car loans during the period,’ the release added.

Citibank Launches ‘CitiHome One’ to Facilitate Home Loan for its Customers

Citibank on Monday launched a novel mortgage product ‘CitiHome One’ to offer its customers a home loan facility. The universal home product enables the bank’s customers to avail a conventional term loan and a credit line for buying or constructing a home of their choice, the leading foreign bank said in a statement here. “We offer customers a dual advantage of interest savings on their home loans by utilising surplus funds and flexibility to structure repayments as per their convenience,” Citi India business manager N. Rajashekaran said.

Customers can also determine the amount they wish to take as credit line with the balance being structured as a term loan. “The home loan account, where the credit line is set, will serve as an umbrella account and allow customers to consolidate their banking requirements into a single CitiHome One account relationship,” Rajashekaran noted. The maximum limit for the home loan is Rs.5 crore (Rs.50 million), while the credit line can extend up to 30 percent of the total facility or Rs.1 crore (Rs.10 million), whichever is lower. Read More »