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« Mumbai Govt Targets Release of 5,500 acres Salt-Pan Land for Development | Home | Q2 Sees 15% Hike in Real Estate Demand »

Banks Compete to Attract Customers for Premium Category Home Loan

Borrowing more than Rs 50 lakh to buy a high-end home has become a breeze, with banks elbowing each other out to have premium customers in their fold. Standard Chartered Bank, a major foreign bank in India, has joined a couple of others in offering very attractive interest rates on home loans above Rs 50 lakh. “Our focus is on the premium category and hence we underwrite home loans only above Rs 50 lakh,” Shyam Srinivasan, head of consumer banking at Standard Chartered Bank, told Financial Chronicle. Standard Chartered is the only foreign bank operating in India that is offering home loans at such attractive interest rates.

State Bank of India (SBI), the country’s largest bank, with its 8 per cent fixed rate for the first year offer has been able to attract a good number of premium customers for home loans as it seeks to get the rich to bank with it for services ranging from regular banking to wealth management. Standard Chartered is charging a low floating interest rate of 8.2 per cent, against SBI’s 8 per cent for the first year, 9.5 per cent for the next two years and thereafter, the prevailing rate.

With the onset of the festival season, many people think about buying their dream home. Buying a premium property in metros such as Mumbai means spending more than half a crore. Public sector lender SBI is trying to garner as much market share as possible with their special home loan scheme. “The 8 per cent interest rate has found favour among first-time home buyers because people want to make the most of the low interest rate regime,” said a senior SBI official, who did not want to be named. According to him, more than 20 per cent of the home loan customers avail of loans more than Rs 50 lakh.

Development Credit Bank (DCB) has the lowest offer among all lenders. In the first year, DCB charges 7.95 per cent for loans up to Rs 5 crore and the prevailing floating rate from the second year onwards. According to several home loan advisers, interest rates should not be the only criteria for taking out a home loan and one should also look at the processing fee and foreclosure charges that the bank levies. Private sector banks such as HDFC and ICICI Bank are offering home loans above Rs 50 lakh at lower interest rates but these lenders also charge hefty processing fees and have hiked foreclosure charges also. Most of the banks charge loan processing fees, which are not refundable, ranging from 0.5 per cent to 1 per cent of the loan account. A customer can, however, based on their credit history, bargain on these charges and get a better deal.

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