After banks now the housing finance are reducing lending rates for the borrowers. LIC Housing Finance (LICHF) has announced a cut in lending rates for new borrowers by 100 basis points across various loan categories. After this cut home loans up to Rs 30 lakh, irrespective of the tenure, will get cheaper by 100 bps at 8.75 per cent, whereas for loans above Rs 30 lakh, the rates have reduced by 9.75 per cent as against 10.75 per cent earlier. The new rates have come into effect from February 1.
LIC Housing Director & CEO R R Nair remarked, “Earlier, similar loans with tenure up to five years charged 9.25 per cent and loans with tenure between five and 20 years attracted 9.75 per cent. Now we have decided to aggregate the two schemes and charge same interest rate”. Around 80 per cent of LICHF’s loans come under the Rs 30-lakh category, with an average loan size at Rs 16 lakh.
Meanwhile after the meeting with acting Finance Minister Pranab Mukherjee, many public sector bank chiefs, including UCO Bank and Corporation Bank, had signaled a cut of 50-100 bps in lending rate.
State Bank of India has already announced 8% cut on home loans for a year, irrespective of tenure and amount.
The offer announced by the SBI does not provide any benefit to the existing borrowers but it will be reviewing the decision on April 1.
Nair said, “We have passed on the benefit of incremental reduction in costs to the new borrowers. We always take a quarterly review of the lending rates for the existing borrowers, as we take into account the average cost of funds which is next due in April”.
Earlier on January 1, the company had announced cut in lending rates for existing borrowers, which is at present in the range of 10.75-11.25 per cent, by 75 bps.
In December quarter, the firm attained a 26.70 per cent rise in net profit at Rs 134.33 crore and distributed Rs 1,944 crore. The firm’s total borrowing in 2008-09 fiscal year would go up to Rs 11,400 crore as compared to Rs 7,490 crore last year.
Nair added, “The repayment outgo has increased with rising costs, so our borrowings for FY09 have increased. We have already borrowed Rs 8,800 crore in FY09 and we would require another Rs 2,500 crore to support our annual disbursement target of Rs 10,000 crore.”
Wednesday, February 18, 2009
Tuesday, February 17, 2009
Home loans still not within reach of borrowers
After the Reserve Bank of India and the government directed banks to cut down the lending interest rates, in spite of that people are facing problem in taking a home loan. The reason being banks are openly insisting that borrowers are required to contribute 20-30% of the value of the property, instead of 10-15% earlier.
Banks finance proportion has also come down from 85-90% of the property value to 70-80%, therefore borrowers (mainly the younger lot) are finding it difficult to go for a home loan.
Recently SBI has brought down its home loan rate to 8% and free zed for one year. Therefore the bank will lend only 80% of the value of house if the requirement is between Rs 20 lakh and Rs 75 lakh. In case the loan is more than Rs 75 lakh, the bank lends only 75% of the amount. In fact, Punjab National Bank (PNB) is lending 75% of the loan for a property of above Rs 20 lakh.
Other PSU banks like Union Bank and UCO Bank are also lending only up to 80% of the value of the house. On the other hand private sector banks like ICICI Bank are asking for 20-30% buyer's contribution while giving a home loan.
In metros like Mumbai, Delhi/NCR Bangalore the average price of a three-bed room apartment is around Rs 40 lakh. In other big cities like Kolkata, Chennai and Pune, it is around Rs 30 lakh. Hence the buyer's contribution to buy a house of Rs 40 lakh has increased to Rs 8-10 lakh, from Rs 4-5 lakh earlier. This is acting as a big restriction for a young buyer especially in the age group of 30-35 years.
But the bankers are not really bothered. UCO Bank executive Director TM Bhasin told as real estate price are coming down, banks have increased the buyer's contribution with a view that the market value of the property should not fall below the loan amount during the course of repayment. He pointed out if the bank gives 85% of the transaction and the market value of the house falls by 20% within six months, the loan amount will be more than the value of the property taken as security. In such conditions, the borrower can decide to walk off surrender the house to the bank and like this bank will be able to recover the money by selling the property. To avoid such conditions, the bank has increased the buyer's contribution.
This factor played a very big role in the current US crisis. The banks have given up to 90% of the value of the house. But when the market price fell below the outstanding loan amount, the borrower decided to surrender the house to banks, which in turn are finding it difficult to sell them to recover money.
Banks have also tightened the norms related to a loan. Previously, they used to allow an EMI of up to 50% of monthly income of the borrower. But now, this has been reduced to 40%, this has made difficult for the borrower.
Banks finance proportion has also come down from 85-90% of the property value to 70-80%, therefore borrowers (mainly the younger lot) are finding it difficult to go for a home loan.
Recently SBI has brought down its home loan rate to 8% and free zed for one year. Therefore the bank will lend only 80% of the value of house if the requirement is between Rs 20 lakh and Rs 75 lakh. In case the loan is more than Rs 75 lakh, the bank lends only 75% of the amount. In fact, Punjab National Bank (PNB) is lending 75% of the loan for a property of above Rs 20 lakh.
Other PSU banks like Union Bank and UCO Bank are also lending only up to 80% of the value of the house. On the other hand private sector banks like ICICI Bank are asking for 20-30% buyer's contribution while giving a home loan.
In metros like Mumbai, Delhi/NCR Bangalore the average price of a three-bed room apartment is around Rs 40 lakh. In other big cities like Kolkata, Chennai and Pune, it is around Rs 30 lakh. Hence the buyer's contribution to buy a house of Rs 40 lakh has increased to Rs 8-10 lakh, from Rs 4-5 lakh earlier. This is acting as a big restriction for a young buyer especially in the age group of 30-35 years.
But the bankers are not really bothered. UCO Bank executive Director TM Bhasin told as real estate price are coming down, banks have increased the buyer's contribution with a view that the market value of the property should not fall below the loan amount during the course of repayment. He pointed out if the bank gives 85% of the transaction and the market value of the house falls by 20% within six months, the loan amount will be more than the value of the property taken as security. In such conditions, the borrower can decide to walk off surrender the house to the bank and like this bank will be able to recover the money by selling the property. To avoid such conditions, the bank has increased the buyer's contribution.
This factor played a very big role in the current US crisis. The banks have given up to 90% of the value of the house. But when the market price fell below the outstanding loan amount, the borrower decided to surrender the house to banks, which in turn are finding it difficult to sell them to recover money.
Banks have also tightened the norms related to a loan. Previously, they used to allow an EMI of up to 50% of monthly income of the borrower. But now, this has been reduced to 40%, this has made difficult for the borrower.
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