Banks Attempt to Make the Best of Festive Season by Lending More for Home Purchase

Published: September 22, 2009

State Bank of India, Deutsche Postbank, ING Vysya Bank and Punjab & Sind Bank are attempting to light up the festival season by lending more for home purchases than they did six months back, thanks to availability of funds and rising trust in the borrower. But individuals are still not buying as high home prices keep them away from their dreams. “The economy has improved and the liquidity situation is much better and interest rates have eased off considerably,’’ Anoop Pabby, joint managing director at Deutsche Postbank Home Finance, told SundayET. “It is only natural then that the home buyers expect the reduced risks to result in reduction in interest rates and relaxation of margin money norms.” The housing finance company is now funding up to 80% of the property value to most salaried people and in a few cases up to 85%, depending on the credit worthiness of the borrower. This is more than the 70% it used to lend a few months back.

With the Reserve Bank of India cutting lending rates to record lows and pumping in unprecedented amount of money into the system. Lenders such as ING Vysya Bank, and Punjab & Sind Bank have reduced the margin money requirement to 15-20% from 25-30% towards the cost of the house on their home loans — as they try to tap the potential home buyers. This leads to a borrower paying investing lesser capital than before. So on a home loan of Rs 25 lakh, a customer would need to pay only Rs 3.75 lakh now against Rs 6.25 lakh demanded earlier, where the margin norm is relaxed to 15% from 25%.

State Bank of India, which has cut the margin requirement to 20% from 25%, may reduce it a further 5%. The interest rates are also in favour of buyers now as it may start rising again in a few months. The rates have fallen to about 8% from as high as 13% in early 2008.

Prices need to further come down to the liking of the middle class.With buyers reluctant to jump in at the bank’s lucrative funding offers, it may be a bit longer before the real estate demand returns to its past glory.Robin Roy, associate director at PricewaterhouseCoopers (PwC), however, is not so optimistic about the home loan market. He believes since these are specific period offers, this may not see a huge surge, as prices of properties have not come down as per expectations.

Public sector lender, IDBI Bank, however, is encouraging borrowers to make higher down payment and offers loans 25-50 basis points lower. “Green shoots still need a little protection. We have gone up to 80% (financing), but we believe for us to be liberal there has to be a downward trend visible in terms of bad loans,” CS Jain, head of personal banking, IDBI Bank said.

Source: Indian Realty News

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1 Comment so far

  1. Ivie July 7, 2011 6:14 pm

    hehe…. this is a great idea! :)

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