Home loan providers are now insisting on construction-linked disbursal of funds to new projects, as they look to make developers more accountable after getting stuck in several stalled projects.
A number of developers have either stopped construction midway or slowed down due to shortage of funds and poor sales in 2008 and the first half of 2009. Lending institutions expect the move to help them monitor the progress of construction and make developers accountable, said a senior executive with a public sector bank.
“Buyers in such projects are in a difficult situation. They have to pay monthly installments towards the loan without getting the possession of house. They also end up shelling out monthly rents during the period,” he said, requesting anonymity.
HDFC home loan, one of the largest lenders in the home loan segment, has discontinued the practice of up front disbursals and linked the flow of funds to progress of construction, said another industry executive who asked not to be named. A spokesman for HDFC declined to comment.
Developers initially used to offer homebuyers up to 10% discount on up front payment. These developers subsequently diverted substantial part of funds to other projects. The delay in completion of work left buyers in a lurch. “There is a high probability of default by such borrowers,” said the CEO of a leading housing finance company.
In construction-linked payment, the Housing Finance Companies or banks do not release the funds up front. They release of around 30% funds initially and the rest is disbursed as per the progress of projects. “In such cases since the exposures are not full and the monthly repayment obligation for borrowers will be lower,” said another banker.
“Many developers have now changed the payment schedule to construction-linked as against timebound payment. This is good for the industry,” DLF group executive director Rajeev Talwar said. However, banks and home finance companies should release 30-35% of the funds towards the lands and development cost, Mr Talwar said.
The lenders have also become more conservative in disbursal of loans. In a volatile real estate market, they offer lower valuations for the property against which they disburse the funds.
“Till 2007 when the home prices were escalating, lenders’ valuations were normally higher than the actual price. Currently, the evaluators of these banks normally value to property at 5-10% lower than the actual cost. As a result, the borrowers need to fork out more to bridge the gap,” said an industry executive.
According to industry estimates, disbursements of home loan in the organised system of financing in the first six months of the current fiscal has been around Rs 60,000 crore. In 2008-09, it touched Rs 1,00,000 crore approximately, while in 2007-08 the amount was around Rs 1,30,000 crore.
Tuesday, December 29, 2009
Tuesday, December 22, 2009
Cheap home loans won't stay for long
Recent home loan rate cuts by banks and financial institutions may not be there for long, as it would lead to increased number of defaults, according to experts. In fact, the lowered interest rates will not be beneficial for the Indian scenario in the longer run.
There are various reasons for this belief. First, there is an inverse correlation between home loan rates and property demand.
"Reduction in home loan rates will always lead to higher demand for properties. In 2006-07, when home loan rates were between 7.5-8 per cent, the property market was at its peak. With higher volumes come higher defaults and delinquencies. In the long term, lower rates will be beneficial for the real estate market but the loan provider needs to be careful in checking the worthiness of the loan taker."
"Sustained period of low interest rates become a fundamental necessity, if India has to achieve a higher home ownership among its populace." He added, "However, Indian banks unlike their US counterparts should not use low upfront interest rates as tools to make home buyers buy into intrinsically unaffordable properties. That would do more harm than good, as we all know by now from the US credit crisis." Therefore, those taking home loans at reduced or special floating rate of interest from banks should remain cautious and prepared for a possible increase of rates.
There are various reasons for this belief. First, there is an inverse correlation between home loan rates and property demand.
"Reduction in home loan rates will always lead to higher demand for properties. In 2006-07, when home loan rates were between 7.5-8 per cent, the property market was at its peak. With higher volumes come higher defaults and delinquencies. In the long term, lower rates will be beneficial for the real estate market but the loan provider needs to be careful in checking the worthiness of the loan taker."
"Sustained period of low interest rates become a fundamental necessity, if India has to achieve a higher home ownership among its populace." He added, "However, Indian banks unlike their US counterparts should not use low upfront interest rates as tools to make home buyers buy into intrinsically unaffordable properties. That would do more harm than good, as we all know by now from the US credit crisis." Therefore, those taking home loans at reduced or special floating rate of interest from banks should remain cautious and prepared for a possible increase of rates.
Pick up in realty urges banks to shift to home loans
In India, the ratio of mortgage to gross domestic product (GDP) is low at 7 percent indicating a huge potential in the housing sector in the coming years. This ratio stands at 12 percent for China, 41percent for Hong Kong and at least 80 percent for most developed countries.
While housing finance companies (HFCs), regulated by National Housing Board, were predominantly catering to the real estate sector, banks too have started increasing their exposure in the sector.
This is evident from the fact that market share of HFCs decreased from nearly 65 percent in 2001 to 55 percent today. Banks, on the other hand have been consistently increasing their share, thus intensifying the competition.
The pick up in real estate prices coupled with various low interest schemes have resulted in surge in real estate sector in the past few months.
SBI announced a special home loan scheme in February and was followed by other government -owned and private banks to ensure their presence in the sector. The housing sector has witnessed significant surge in volumes, especially in the "affordable housing sector".
Housing Finance Companies feel that increasing share of banks' in the home loan segment is a temporary phenomenon. They say that banks are likely to come across asset-liability mismatch as these loans have a long gestation period. Further, these loans are a zero-sum game in the initial period due to lower home loan interest rates offered. HFCs, on the other hand, typically, raise money that match their requirements and thus reduce the asset-liability mismatch.
While housing finance companies (HFCs), regulated by National Housing Board, were predominantly catering to the real estate sector, banks too have started increasing their exposure in the sector.
This is evident from the fact that market share of HFCs decreased from nearly 65 percent in 2001 to 55 percent today. Banks, on the other hand have been consistently increasing their share, thus intensifying the competition.
The pick up in real estate prices coupled with various low interest schemes have resulted in surge in real estate sector in the past few months.
SBI announced a special home loan scheme in February and was followed by other government -owned and private banks to ensure their presence in the sector. The housing sector has witnessed significant surge in volumes, especially in the "affordable housing sector".
Housing Finance Companies feel that increasing share of banks' in the home loan segment is a temporary phenomenon. They say that banks are likely to come across asset-liability mismatch as these loans have a long gestation period. Further, these loans are a zero-sum game in the initial period due to lower home loan interest rates offered. HFCs, on the other hand, typically, raise money that match their requirements and thus reduce the asset-liability mismatch.
Citibank Launch mortgage product for home loan facility
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.
The loan will have a variable interest rate linked to the bank's mortgage prime lending rate.
The repayment tenure for the term loan is 20 years and for the credit line 10 years.
Customers can also make a one-time repayment or convert the credit line into a term loan and pay back through EMIs (equated monthly installments).
"Purchasing a home is a major life event and a mortgage is one of the financial commitments an individual makes. CitiHome One is designed to place customers in command of their finances and make home-buying a win-win for them," Rajashekaran added.
Apply and Check Eligibility for Citibank Home Loan
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.
The loan will have a variable interest rate linked to the bank's mortgage prime lending rate.
The repayment tenure for the term loan is 20 years and for the credit line 10 years.
Customers can also make a one-time repayment or convert the credit line into a term loan and pay back through EMIs (equated monthly installments).
"Purchasing a home is a major life event and a mortgage is one of the financial commitments an individual makes. CitiHome One is designed to place customers in command of their finances and make home-buying a win-win for them," Rajashekaran added.
Apply and Check Eligibility for Citibank Home Loan
Monday, December 21, 2009
Reverse Mortgage Loan
CENT Swabhiman Plus, a life-long reverse mortgage annuity launched by Central Bank of India and Star Union Daiichi Life Insurance. This product is specially designed for the senior citizens. This product will provide them with a monthly or quarterly or half yearly or annual income as mutually agreed by then borrower and the bank against his/her home.
The earlier version of reverse mortgage scheme has been improvised to provide much more benefits due to feedback received about the insufficient funding of the 20 year cap on annuity payments. NHB asked banks and insurance companies to design a product such that its annuity would not cease after 20 years (though the individual was allowed to stay in the house till death). Thus the revised product provides continuous annuity till the survival of the individual as well as gets higher returns.
Insurers have arrived at the annuity figure using the mortality charts where as the banks discounted the property value at a specific rate to calculate payments. The interest rate under the new scheme by the Central Bank of India is 9.5% against 12.5%, resulting in higher payouts.
There are two choices
The bank will lend up to 60-75% of the property value.
ADVANTAGES
Payment under reverse mortgage loan are exempt from Income Tax under Section 10(43) of the Income –Tax Act, 1961, the monthly or periodic annuity are defined as ‘salaries’ hence, taxable under Section 17 of the I-T Act. Although any amount received as loan (lump sum or in installments) under this scheme is not taxable as it is not regarded as income. And the bank has the right to foreclosure of the annuity if the borrower has not stayed in the property for a continuous period of one year (even if he or she has to move in with his son or daughter due to ill health or any other reason).
(Source :- http://www.deal4loans.com/loans/home-loan/new-reverse-mortgage-loan/)
The earlier version of reverse mortgage scheme has been improvised to provide much more benefits due to feedback received about the insufficient funding of the 20 year cap on annuity payments. NHB asked banks and insurance companies to design a product such that its annuity would not cease after 20 years (though the individual was allowed to stay in the house till death). Thus the revised product provides continuous annuity till the survival of the individual as well as gets higher returns.
Insurers have arrived at the annuity figure using the mortality charts where as the banks discounted the property value at a specific rate to calculate payments. The interest rate under the new scheme by the Central Bank of India is 9.5% against 12.5%, resulting in higher payouts.
There are two choices
- Annuitant receives a life annuity at a constant rate till he/she survives.
- Annuitant will receive annuity for life with return of the purchase price on his death.
- Applicant should be above the age of 60 years
- In case of co-borrowers, atleast one of the borrowers should be above 60 and the other should be above 55 years of age.
The bank will lend up to 60-75% of the property value.
ADVANTAGES
- Provides life time income which can be used for any financial need like house renovation, medical or other personal expense etc.
- Borrower has the option of 25% of the loan amount (up to Rs.15 lakh max) which can be used in case of any emergency. However, it is not advisable to use this money for trading or speculative purposes.
Payment under reverse mortgage loan are exempt from Income Tax under Section 10(43) of the Income –Tax Act, 1961, the monthly or periodic annuity are defined as ‘salaries’ hence, taxable under Section 17 of the I-T Act. Although any amount received as loan (lump sum or in installments) under this scheme is not taxable as it is not regarded as income. And the bank has the right to foreclosure of the annuity if the borrower has not stayed in the property for a continuous period of one year (even if he or she has to move in with his son or daughter due to ill health or any other reason).
(Source :- http://www.deal4loans.com/loans/home-loan/new-reverse-mortgage-loan/)
Axis Bank removes penalty on home loan pre-payment
- http://deal4loans.haimachan.com/
Bank offers 25-year tenure, flexible plans to raise loan offtake
Axis Bank, the third largest private sector bank by assets, has taken the lead in scrapping this practice on home loan. The bank has decided not to charge pre-payment penalties to its home loans even when customers shift a loan to a competing bank.Others, including State Bank of India, Housing Development Finance Corporation and ICICI Bank impose pre-payment penalties when any of their customers seeks to refinance a home loan through fresh loans at lower Home Loan Interest Rates.
Axis Bank Home Loan is the only Home Loan that does not include any pre-payment penalty charge from customers either for part pre-payment or full pre-payment.
SBI and Punjab National Bank have no pre-payment charges if the customer prepays from own resources or if half of the loan is repaid. But if the pre-payment is to be refinanced by any other institution or bank, the customer has to pay 2 per cent penalty on the money paid.
“At Axis Bank, we believe customers have the right to exercise their choice to shift if they find a rate advantage,” said Manju Srivatsa, president of retail banking at Axis Bank.
Axis has close to 50 retail asset centres, which are specialised units dedicated to processing retail loan applications ensuring quicker turnaround time.
Though a small player in the market, Axis Bank's new CEO Shikha Sharma is bullish about growing the bank at a pace it has never seen before. The retail business is expected to fuel a substantial part of the bank’s growth.
The bank had a home loan book of Rs 12,049 crore at the end of the second quarter. It plans to grow its market share through customer-friendly home loan products with a variety of repayment options, like extended tenures, lower rates of interest and quick processing time.
HDFC Home Loan allows pre-payment of only 25 per cent of the opening balance at a time without any charge. For any amount over and above that, there is a pre-payment penalty of 2 per cent.
ICICI Home Finance allows pre-payment of a loan if 12 equated monthly installments (EMI) are kept as outstanding. In case of complete closure of the loan, the bank charges a penalty of 2 per cent of the amount prepaid.
HDFC managing director Renu Karnad Sud said, “Instead of expanding the home loan market, banks are only refinancing through teaser schemes. Pre-payment penalty is charged by banks and institutions because we have a cost to our funds and if we pre-pay, we have to pay a penalty to our lenders. We do not want to penalise customers. We only discourage them from borrowing from other banks to prepay us.”
Axis Bank also has a longer repayment period of 25 years instead of 20 years most players have today. The bank also has a bouquet of innovative home loan products targeted at different category of customers.
For example, it has an extended tenure loan targeted at the young salaried group, who aspire to buy a home with smaller EMIs and a longer repayment period.
“This is to encourage youngsters who have begun earning to buy an aspirational property. This category does not want a huge EMI outgo, but does not mind an extended tenure. The average loan size is Rs 12 to 15 lakh and these schemes have helped us maintain a year-on-year growth of 25 to 30 per cent,” said Srivatsa.
Axis Bank's ‘Step Down home loan’ targets families where parents are nearing retirement and children have just started earning. The loan is structured in such a way so as to offer higher EMIs at the start and lower installments at a later stage.
These are all floating rate loans with an interest rate of 8.75 per cent for loans up to Rs 30 lakh and 9.25 per cent for loans above Rs 30 lakh.
Axis Bank also has a special home loan scheme that offers an interest rare of 8 per cent for the first year and floating rate for the remaining tenure of the loan where it competes with SBI Home Loan, the pioneer of the 8 per cent home loan scheme.
At present rates, the interest rates applicable for customers from the second year will be 8.75 per cent for loans up to Rs 30 lakh and 9.25 per cent for loans above Rs 30 lakh.
Wednesday, December 16, 2009
IDBI Slashes home loan rates to 8.25 Percent
IDBI Bank today announced special home loan scheme which is a combination of fixed and floating interest rates. The scheme offers home loans at 8.25 per cent irrespective of the amount till March 2012, giving a wider option of cheap loans to home buyers. Thereafter, the interest rate charged on these home loans would be at the then prevailing floating interest rates.
The offer is applicable to all new home-loan customers applying on or before March 31, 2010, and taking a part or full disbursement during the period, an IDBI Bank press release said.
After the offer period, Home Loan Interest Rates will be charged based on the then prevailing floating rates, the bank said.
IDBI Bank, at present, is offering 8.75 per cent for loans up to Rs 30-lakh, 9 per cent for loans between Rs 30-lakh and up to Rs 50-lakh and 9.25 per cent for loans above Rs 50-lakh.
State Bank of India (SBI) is already offering home loans in the range of 8 per cent. A home loan war was triggered when mortgage leader HDFC cut interest rates to match SBI. Since then the violent competition in the segment is getting intensified day by day with ICICI Bank and another player Dewan Housing also joining the league.
Click here to Check Eligibility Criteria and Document required for IDBI Home Finance.
( Source:- http://deal4loans.haimachan.com/ )
The offer is applicable to all new home-loan customers applying on or before March 31, 2010, and taking a part or full disbursement during the period, an IDBI Bank press release said.
After the offer period, Home Loan Interest Rates will be charged based on the then prevailing floating rates, the bank said.
IDBI Bank, at present, is offering 8.75 per cent for loans up to Rs 30-lakh, 9 per cent for loans between Rs 30-lakh and up to Rs 50-lakh and 9.25 per cent for loans above Rs 50-lakh.
State Bank of India (SBI) is already offering home loans in the range of 8 per cent. A home loan war was triggered when mortgage leader HDFC cut interest rates to match SBI. Since then the violent competition in the segment is getting intensified day by day with ICICI Bank and another player Dewan Housing also joining the league.
Click here to Check Eligibility Criteria and Document required for IDBI Home Finance.
( Source:- http://deal4loans.haimachan.com/ )
Sunday, December 6, 2009
Icici Home Loans New Scheme-Fixed 2 yrs rate at 8.25%
Icici Hfc has launched special “Two Year Fixed Rate Scheme” for its
customers. Under this scheme they propose a Two Year Fixed Rate for its
customers with effect from December 03, 2009. This scheme will be applicable
for all new Home Loan Sanctions and Disbursements. The Home Loan rates will be fixed at 8.25% for two years after the disbursemnet has happened.
Under this scheme the below mentioned rates will be applicable
Upto Rs. 20 Lakhs
8.25% Fixed rate of interest for first two years
After 2 yrs
FRR – 4 .00% (8.75% at current rates *)
Loans between Rs.20 Lakhs to Rs. 50 Lakhs
8.25% Fixed rate of interest for first two years
FRR – 3 .50% ( 9.25% at current rates *)
Loans above Rs. 50 Lakhs
8.25% Fixed rate of interest for first two years
FRR – 3 .00% (9.75% at Current rates)
The salient features of this product are as given below:
1. The rate of interest would be fixed for the initial two year period
from the date of first disbursement.
2. Subsequent to the completion of 2 years, the loan will automatically
move to ARHL. The ARHL loan will be benchmarked to ICICI Bank Floating
Reference Rate ( FRR ).
3. The scheme will be offered on sanctions done till January 31, 2010.
It will be valid till March 31, 2010 and the first disbursement of the loan
should be availed on or before this date.
4. While calculating the loan eligibility the rate applicable from
third year onwards will be considered.
5. Repayment for all loans sanctioned and disbursed under this scheme
has to be made through ECS or Auto Debit only.
This is one of the best Home loan schemes launched by Icici in recent times. So do not hold, buy your dream home.
Click For Apply ICICI Home Finance.
customers. Under this scheme they propose a Two Year Fixed Rate for its
customers with effect from December 03, 2009. This scheme will be applicable
for all new Home Loan Sanctions and Disbursements. The Home Loan rates will be fixed at 8.25% for two years after the disbursemnet has happened.
Under this scheme the below mentioned rates will be applicable
Upto Rs. 20 Lakhs
8.25% Fixed rate of interest for first two years
After 2 yrs
FRR – 4 .00% (8.75% at current rates *)
Loans between Rs.20 Lakhs to Rs. 50 Lakhs
8.25% Fixed rate of interest for first two years
FRR – 3 .50% ( 9.25% at current rates *)
Loans above Rs. 50 Lakhs
8.25% Fixed rate of interest for first two years
FRR – 3 .00% (9.75% at Current rates)
The salient features of this product are as given below:
1. The rate of interest would be fixed for the initial two year period
from the date of first disbursement.
2. Subsequent to the completion of 2 years, the loan will automatically
move to ARHL. The ARHL loan will be benchmarked to ICICI Bank Floating
Reference Rate ( FRR ).
3. The scheme will be offered on sanctions done till January 31, 2010.
It will be valid till March 31, 2010 and the first disbursement of the loan
should be availed on or before this date.
4. While calculating the loan eligibility the rate applicable from
third year onwards will be considered.
5. Repayment for all loans sanctioned and disbursed under this scheme
has to be made through ECS or Auto Debit only.
This is one of the best Home loan schemes launched by Icici in recent times. So do not hold, buy your dream home.
Click For Apply ICICI Home Finance.
Wednesday, December 2, 2009
HDFC home loan at Just 8.25% rate of interest
HDFC (Housing Development Finance Corp), has decided to give loan at a fixed rate of 8.25% per annum. HDFC Home Loan new offer will be for all new loans taken before April 1, 2010, and the 8.25% Home Loan rates will remain fixed till March 2012. Thereafter, depending upon the loan amount, the customer will move to a floating rate structure, applicable on April 1, 2012. NRIs and PIOs can also get loans at this reduced rate, an HDFC release said.
Over the last few months, SBI had been offering home loan at as low as 8% fixed for the first year and afterward moving to a higher rate. Compared to HDFC’s 8.25% offer, SBI offers home loans of up to Rs 30 lakh at 8% for the first year, 8.5% for second year and from third year onward it moves to a floating rate, the bank said. The hugely advertised 8% rate from SBI had generated substantial interest among home buyers since it was launched.
According to industry estimate, for a 20-year loan of Rs 30 lakh and considering present rate formation is valid when customers move from fixed to a floating rate, the effective interest rate for the tenure of the SBI home loan will be 9.24% per annum compared to 8.63% in HDFC. In the Rs 30 lakh to Rs 50 lakh bracket, the effective rates work out to 9.24% for SBI and 8.81% for HDFC. And for loans of Rs 50 lakh and above, effective rate for SBI will be 9.5% compared to 9% for HDFC. A lower rate leads to savings on the part of the customer.
HDFC Chairman Deepak Parekh had, however, criticised the SBI offer and said the bank was “not trying to get any new money or loans in the housing loan market but only trying to get existing customers”. Subsequently, in a letter to shareholders, he said the differential rate could result in a subprime-like crisis.
HDFC also launched “Move in Home loans” to assist customers to get loans quickly to buy a “Ready to move in new property or a Resale property”.
All the customers who apply home loan and take a part-disbursement before March 31, 2010, will get this rate. The rate is fixed for loans of all amount but after March 2012, prevailing rates as per the amount of the loan will be applicable to the home buyers, an HDFC release said. At present, HDFC has three slabs: loans up to Rs 30 lakh, above Rs 30 lakh to below Rs 50 lakh and Rs 50 lakh and above.
Over the last few months, SBI had been offering home loan at as low as 8% fixed for the first year and afterward moving to a higher rate. Compared to HDFC’s 8.25% offer, SBI offers home loans of up to Rs 30 lakh at 8% for the first year, 8.5% for second year and from third year onward it moves to a floating rate, the bank said. The hugely advertised 8% rate from SBI had generated substantial interest among home buyers since it was launched.
According to industry estimate, for a 20-year loan of Rs 30 lakh and considering present rate formation is valid when customers move from fixed to a floating rate, the effective interest rate for the tenure of the SBI home loan will be 9.24% per annum compared to 8.63% in HDFC. In the Rs 30 lakh to Rs 50 lakh bracket, the effective rates work out to 9.24% for SBI and 8.81% for HDFC. And for loans of Rs 50 lakh and above, effective rate for SBI will be 9.5% compared to 9% for HDFC. A lower rate leads to savings on the part of the customer.
HDFC Chairman Deepak Parekh had, however, criticised the SBI offer and said the bank was “not trying to get any new money or loans in the housing loan market but only trying to get existing customers”. Subsequently, in a letter to shareholders, he said the differential rate could result in a subprime-like crisis.
HDFC also launched “Move in Home loans” to assist customers to get loans quickly to buy a “Ready to move in new property or a Resale property”.
All the customers who apply home loan and take a part-disbursement before March 31, 2010, will get this rate. The rate is fixed for loans of all amount but after March 2012, prevailing rates as per the amount of the loan will be applicable to the home buyers, an HDFC release said. At present, HDFC has three slabs: loans up to Rs 30 lakh, above Rs 30 lakh to below Rs 50 lakh and Rs 50 lakh and above.
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