State Bank of Patiala has announced extension of its concessional home loan rate scheme under and 'Ezee Car Loan Scheme' under which it is offering 8 per cent, till December 31 this year.
A spokesman at the head office informed under the House Loan Scheme, the bank is offering fixed rate of 8 per cent for the 1st year and 9 percent for 2nd and 3rd year thereafter the prevailing base rate will be applicable. The maximum tenure of the loan is 25 years.
He said under its Ezee Car Loan Scheme for new cars, bank is offering fixed rate of 8 percent for the 1st year and 10 per cent for 2nd and 3rd year, thereafter the prevailing base rate will be applicable. For this maximum tenure is 7 years.
Under these special schemes bank will not charge any prepayment penalty if the borrower want to pre-pay the loan at the time of reset.
He told, the special schemes on home and car loan have been extended to make possible house /car loan available at affordable rates to general public.
Wednesday, October 6, 2010
Monday, September 27, 2010
Banks might extend festive offers for two months, not raise loan rates
Every year at the time of Dussehra and Diwali, the demand for loans increases keeping in mind the holiday season ahead banks have decided not to raise home loan rates.
However, when the Reserve Bank of India had revised its police rates in mid-September, several banks had said they might increase their lending rates in October when the base rate, on which loans are priced, is reviewed.
This year also, considering the festival months of October and November, banks may opt for not raising loan rates seeing huge demand in personal, car and home loans, as this is considered to be an auspicious time to buy homes or other assets. During this period, most banks offer special schemes featuring discounts in the form of a waiver in processing fees and lower rates to attract customers.
Oriental Bank of Commerce CMD TY Prabhu said, “Banks may not hike home rates immediately since sales are expected to pick up soon after the Pitr Paksha is over.” During Pitr Paksha (shards), which is related to rites performed by Hindus, many people consider it inauspicious and choose not to take any major investment decisions.
On the other hand banks might be under pressure to raise lending rates in October as their cost of funds has increased by 50 to 100 basis points during the last quarter. Interest rates on bulk deposits and certificate of deposits have crossed 8% for one year compared with 7% a few months ago. Thus, Mr Prabhu said if banks are under pressure to raise lending rates, they might raise the base rate but will also narrow the spread between the base rate and home loan rates. At present, banks have set their base rate in the range of 7.50% to 8%.
The State Bank of India special home loan scheme is going to end on September 30, but its officials have said most probably bank will extend the scheme for another quarter to attract customers in the festive season. Under the special scheme SBI is offering a fixed rate of interest of 8% in the first year, 9% in the second and third year, after which the floating rate is applicable.
Last week, Corporation Bank also launched its special home loan and vehicle loan scheme, known as grand festival offer, in which it is offering loans up to Rs 30 lakh at base rate of 7.75% for the first year and 50bps above the base rate for second and 8.25% in the third year. But bank will charge 0.25% more if the loan is above Rs 30 lakh. SM Swati, general manager in charge of retail lending at Corporation Bank said, “So far, demand for home loan has not been very encouraging, although we are better than the peers. But with this offer, we expect to deploy Rs 1,000 crore.”
However, when the Reserve Bank of India had revised its police rates in mid-September, several banks had said they might increase their lending rates in October when the base rate, on which loans are priced, is reviewed.
This year also, considering the festival months of October and November, banks may opt for not raising loan rates seeing huge demand in personal, car and home loans, as this is considered to be an auspicious time to buy homes or other assets. During this period, most banks offer special schemes featuring discounts in the form of a waiver in processing fees and lower rates to attract customers.
Oriental Bank of Commerce CMD TY Prabhu said, “Banks may not hike home rates immediately since sales are expected to pick up soon after the Pitr Paksha is over.” During Pitr Paksha (shards), which is related to rites performed by Hindus, many people consider it inauspicious and choose not to take any major investment decisions.
On the other hand banks might be under pressure to raise lending rates in October as their cost of funds has increased by 50 to 100 basis points during the last quarter. Interest rates on bulk deposits and certificate of deposits have crossed 8% for one year compared with 7% a few months ago. Thus, Mr Prabhu said if banks are under pressure to raise lending rates, they might raise the base rate but will also narrow the spread between the base rate and home loan rates. At present, banks have set their base rate in the range of 7.50% to 8%.
The State Bank of India special home loan scheme is going to end on September 30, but its officials have said most probably bank will extend the scheme for another quarter to attract customers in the festive season. Under the special scheme SBI is offering a fixed rate of interest of 8% in the first year, 9% in the second and third year, after which the floating rate is applicable.
Punjab National Bank, the second-largest bank, under its festive offer on home loans has fixed rate of interest of 8.5% for the first three years and afterwards the prevailing floating rates will be applicable.
Last week, Corporation Bank also launched its special home loan and vehicle loan scheme, known as grand festival offer, in which it is offering loans up to Rs 30 lakh at base rate of 7.75% for the first year and 50bps above the base rate for second and 8.25% in the third year. But bank will charge 0.25% more if the loan is above Rs 30 lakh. SM Swati, general manager in charge of retail lending at Corporation Bank said, “So far, demand for home loan has not been very encouraging, although we are better than the peers. But with this offer, we expect to deploy Rs 1,000 crore.”
Friday, September 10, 2010
Indiabulls Financial Services launches special home loan scheme for salaried class
Indiabulls Financial Services, a financial service provider launched a special home loan scheme for the salaried class. Under this scheme it is offering 8.5% interest up to March 31, 2011, followed by 9.5% till 2012, the company said in a statement.
It said, subsequently from the third year onwards 9.5% floating rate will be charged.
Earlier, country largest mortgage lender HDFC had launched a dual rate home loan (DRHL), in which for the initial year fixed interest will be charged and later it will change to floating rate.
All the new home loan customers, to avail the new DRHL-4 offer have to apply on or before September 30 and take at least part disbursement before October 31.
Indiabulls Financial Services CEO Gagan Banga said, "Introduction of this new home loan scheme at 8.5 per cent is a move to augur the aggressive growth plans, with an annual target of Rs 6,000 crore worth new home loans disbursement."
The borrowers can avail offer at 140 cities and towns across India.
"We plan to grow our home loans business by 40-45 per cent this fiscal and increase our market share from the current 4 per cent to 10-15 per cent by 2014," Banga added.
He said every year company is in the process of adding 25-30 cities to its distribution network and, also increasing the sales strength by 25-30 per cent, at present its sales strength is of 1500.
It said, subsequently from the third year onwards 9.5% floating rate will be charged.
Earlier, country largest mortgage lender HDFC had launched a dual rate home loan (DRHL), in which for the initial year fixed interest will be charged and later it will change to floating rate.
All the new home loan customers, to avail the new DRHL-4 offer have to apply on or before September 30 and take at least part disbursement before October 31.
Indiabulls Financial Services CEO Gagan Banga said, "Introduction of this new home loan scheme at 8.5 per cent is a move to augur the aggressive growth plans, with an annual target of Rs 6,000 crore worth new home loans disbursement."
The borrowers can avail offer at 140 cities and towns across India.
"We plan to grow our home loans business by 40-45 per cent this fiscal and increase our market share from the current 4 per cent to 10-15 per cent by 2014," Banga added.
He said every year company is in the process of adding 25-30 cities to its distribution network and, also increasing the sales strength by 25-30 per cent, at present its sales strength is of 1500.
Thursday, September 9, 2010
State-run banks and HFCs to lend more for low-cost housing
The finance ministry will be pushing state-run banks and housing finance companies to set aside more funds for the low-cost housing projects.
The ministry of housing and urban poverty alleviation said that low subsidy demand from banks clearly indicates to the extremely bad lending to low-cost housing.
A finance ministry official told the ministry has asked the banks to submit details about their exposure towards low-cost housing and the reasons for slow progress.
However the government has set aside an interest subsidy of Rs 1,100 crore for four years up to 2012 for the low-cost housing scheme for the urban poor, but, as per government records there has been claim of only Rs 4 crore from banks.
An official working with ministry of housing said, “We’ve requested that all public sector banks should be asked to increase their lending towards the segment so that subsidy amount provided for the scheme is utilized.”
Government is also planning to ask the regional rural banks to lend to low-cost housing for this it will make these banks eligible for the interest subsidy on loans under the scheme.
National Housing Board (NHB) and HUDCO have been made the nodal agencies which will provide 5% interest subsidy on housing loan given to economically weaker sections and low income groups.
However government has instructed 17 state-run banks and six housing finance companies to provide these low-cost loans. On the other hand, bank say that the local authorities are directly responsible for low disbursals as the borrower is required to provide evidence to prove his eligibility for the subsidy.
Bank of Baroda official said, “The inordinate delays on their part is reflective in low credit off take.”
To solve the problem the government has decided to give the authority to the banks to decide on the eligibility of the borrower. NHB executive director RV Verma said, “It has been decided that banks on their own assessment can provide these certificates and disburse loans.”
Up till March 2012, government is planning to provide subsidy support to over 3 lakh low cost houses. “The scheme is a blend of achieving social needs while maintaining a profitable orientation for the banks. Banks will finally see its a win-win situation for them,” Mr Verma said and added that in states such as Andhra Pradesh, Tamil Naidu and Madhya Pradesh the scheme is successful.
Under this scheme banks can sanction a maximum of Rs 3 lakh to a borrower belonging to economically weaker category and Rs 5 lakh to a low income one. Moreover scheme provides a subsidy of 5% for a loan amount of Rs 1 lakh for the full tenure of the loan.
The ministry of housing and urban poverty alleviation said that low subsidy demand from banks clearly indicates to the extremely bad lending to low-cost housing.
A finance ministry official told the ministry has asked the banks to submit details about their exposure towards low-cost housing and the reasons for slow progress.
However the government has set aside an interest subsidy of Rs 1,100 crore for four years up to 2012 for the low-cost housing scheme for the urban poor, but, as per government records there has been claim of only Rs 4 crore from banks.
An official working with ministry of housing said, “We’ve requested that all public sector banks should be asked to increase their lending towards the segment so that subsidy amount provided for the scheme is utilized.”
Government is also planning to ask the regional rural banks to lend to low-cost housing for this it will make these banks eligible for the interest subsidy on loans under the scheme.
National Housing Board (NHB) and HUDCO have been made the nodal agencies which will provide 5% interest subsidy on housing loan given to economically weaker sections and low income groups.
However government has instructed 17 state-run banks and six housing finance companies to provide these low-cost loans. On the other hand, bank say that the local authorities are directly responsible for low disbursals as the borrower is required to provide evidence to prove his eligibility for the subsidy.
Bank of Baroda official said, “The inordinate delays on their part is reflective in low credit off take.”
To solve the problem the government has decided to give the authority to the banks to decide on the eligibility of the borrower. NHB executive director RV Verma said, “It has been decided that banks on their own assessment can provide these certificates and disburse loans.”
Up till March 2012, government is planning to provide subsidy support to over 3 lakh low cost houses. “The scheme is a blend of achieving social needs while maintaining a profitable orientation for the banks. Banks will finally see its a win-win situation for them,” Mr Verma said and added that in states such as Andhra Pradesh, Tamil Naidu and Madhya Pradesh the scheme is successful.
Under this scheme banks can sanction a maximum of Rs 3 lakh to a borrower belonging to economically weaker category and Rs 5 lakh to a low income one. Moreover scheme provides a subsidy of 5% for a loan amount of Rs 1 lakh for the full tenure of the loan.
Friday, August 27, 2010
Special home loans still continue with banks
Recently, many banks have raised their BPLRs but teaser loans still continue to be provided by many banks and financial institutions. Along with soft interest rates, host of innovative schemes are being offered to attract customers, informed industry experts and bankers.
For instance, LIC Housing Finance has introduced variable EMI (equated monthly installment) product to target the young salaried class, who are planning to buy a house but cannot afford high EMI. The scheme offered by them would structure the repayments in such a way that EMIs remain low at the start of the loan and will increase as the loan period progresses. The scheme has been designed assuming that the repayment of capacity of the customer will increase as salaries increase.
The company is offering product at a floating interest rate of 8.75 per cent for loans up to Rs 1.5 crore.
RR Nair, managing director and chief executive officer of LIC Housing Finance points out, “This product is for the young salaried employees, who would like to own a big home but do not have the salary to match. There is a lot of scope to be innovative in the home loan market, as there are varied customers with a variety of needs.”
Punjab National Bank, a public sector lender is giving choice to the customers to extend even margin money payments over a period of time and is also offering home loans at a lower rate of interest.
Recently bank has launched a home loan festival bonanza, in which it has slashed interest rate to 8.50 per cent (fixed) on loans up to Rs 50 lakh for three years across all repayment tenures and has also waived off processing fees and documentation charges. Bank has also waived off prepayment charges.
Already HDFC and State Bank of India (SBI) are offering floated fixed/ floating rate products, under which fixed interest rate is offered for a specific period of time and then it will be reverted to floating rate of interest.
SBI has been doing good business in home loan segment as it is offering an invitation rate of 8 per cent, which is the lowest in the market.
LIC Housing Finance has also introduced a product in home loan segment called Advantage 5, in which it offers a fixed interest rate of 9.25 per cent for five years thereafter will be reverted to a floating rate.
More banks and home finance institutions are offering similar fixed-cum-floating rate products to attract customers.
Sumeet Vaid, chief executive officer of Financial Freedom, a financial planning company based in Mumbai says, “In a rising interest rate regime, it is beneficial for customers to get into a fixed loan scheme, so that the interest rate is protected for a short duration. Banks are looking at very aggressive strategies to win home loan customers.”
For instance, LIC Housing Finance has introduced variable EMI (equated monthly installment) product to target the young salaried class, who are planning to buy a house but cannot afford high EMI. The scheme offered by them would structure the repayments in such a way that EMIs remain low at the start of the loan and will increase as the loan period progresses. The scheme has been designed assuming that the repayment of capacity of the customer will increase as salaries increase.
The company is offering product at a floating interest rate of 8.75 per cent for loans up to Rs 1.5 crore.
RR Nair, managing director and chief executive officer of LIC Housing Finance points out, “This product is for the young salaried employees, who would like to own a big home but do not have the salary to match. There is a lot of scope to be innovative in the home loan market, as there are varied customers with a variety of needs.”
Punjab National Bank, a public sector lender is giving choice to the customers to extend even margin money payments over a period of time and is also offering home loans at a lower rate of interest.
Recently bank has launched a home loan festival bonanza, in which it has slashed interest rate to 8.50 per cent (fixed) on loans up to Rs 50 lakh for three years across all repayment tenures and has also waived off processing fees and documentation charges. Bank has also waived off prepayment charges.
Already HDFC and State Bank of India (SBI) are offering floated fixed/ floating rate products, under which fixed interest rate is offered for a specific period of time and then it will be reverted to floating rate of interest.
SBI has been doing good business in home loan segment as it is offering an invitation rate of 8 per cent, which is the lowest in the market.
LIC Housing Finance has also introduced a product in home loan segment called Advantage 5, in which it offers a fixed interest rate of 9.25 per cent for five years thereafter will be reverted to a floating rate.
More banks and home finance institutions are offering similar fixed-cum-floating rate products to attract customers.
Sumeet Vaid, chief executive officer of Financial Freedom, a financial planning company based in Mumbai says, “In a rising interest rate regime, it is beneficial for customers to get into a fixed loan scheme, so that the interest rate is protected for a short duration. Banks are looking at very aggressive strategies to win home loan customers.”
Monday, August 23, 2010
The factors that determine home loan amount eligibility
Many of us plan to take home loan but don’t know the factors that banks take into consideration for fixing loan amount.
1. Age: Borrowers age is the most important factor. If the borrower is working in public sector and is closer to the retirement then the loan amount will be less. The reason is, the number of working years will be relatively lesser and the EMIs will be higher. This will increase the burden on the borrower therefore banks will taken into account the age of the borrower while deciding the eligibility.
2. Income: The monthly disposable income is the most important factor for loan eligibility. Usually the EMI is to be set in accordance to a fixed percentage of the applicant’s disposable income which will enable the borrower to repay the loan installments comfortably. This reduces the chance of default.
3. Source of Income: Before sanctioning the loan banks check the source of income. The borrower has a secure job or steady and assured stream of income if he owns a business. In case the borrower is unemployed or does not have secure job then in spell of unemployment it would be difficult to keep up the EMI payments.
4. Securities: In case the borrower is not earning good salary but his financial background is strong this will also help him in getting a higher loan amount. If the borrower has other securities such as fixed deposits or good amount of insurance, this also helps in getting a higher amount of loan. If the borrower’s repayment record is good then also bank tends to offer a higher amount.
1. Age: Borrowers age is the most important factor. If the borrower is working in public sector and is closer to the retirement then the loan amount will be less. The reason is, the number of working years will be relatively lesser and the EMIs will be higher. This will increase the burden on the borrower therefore banks will taken into account the age of the borrower while deciding the eligibility.
2. Income: The monthly disposable income is the most important factor for loan eligibility. Usually the EMI is to be set in accordance to a fixed percentage of the applicant’s disposable income which will enable the borrower to repay the loan installments comfortably. This reduces the chance of default.
3. Source of Income: Before sanctioning the loan banks check the source of income. The borrower has a secure job or steady and assured stream of income if he owns a business. In case the borrower is unemployed or does not have secure job then in spell of unemployment it would be difficult to keep up the EMI payments.
4. Securities: In case the borrower is not earning good salary but his financial background is strong this will also help him in getting a higher loan amount. If the borrower has other securities such as fixed deposits or good amount of insurance, this also helps in getting a higher amount of loan. If the borrower’s repayment record is good then also bank tends to offer a higher amount.
Thursday, August 12, 2010
Banks don’t give joint home loan to friends, cousins, live-in couples
To increase home loan eligibility you can go for joint loan. But housing finance companies (HFCs) provide joint home loans to father-son duo or spouses, but don’t give to siblings, cousins, sisters, friends and live-in couples.
However LIC Housing Finance has a product in which brother-sister duo can jointly avail home loan by combining their incomes, subject to certain terms and conditions.
But joint home loan can be availed by two brothers, however there are certain conditions.
A senior official working with LIC Housing Finance said some of the HFC do accept such applications, but volume of the loan sanctioned might be low as high risk is involved in this.
The official said, the HFC has stringent internal norms for sanctioning such loans. In such cases the loan eligibility reduces by 10 per cent.
The official further said, “The residual income (income left after excluding monthly expenses and other costs) goes down when siblings avail a home loan. Thus, the loan eligibility too goes down.”
In case of father-son duo the joint home loan is sanctioned depending on the remaining tenure of service of the father if he is a salaried professional. Likewise two brothers can also avail a joint loan, if both of them are co-owners of the property.
Santosh Govardhan, chief credit officer with IDBI Home Finance, said, “Two brothers availing a joint home loan have to be working and residing in the same city. Also, the property has to be a minimum two bedroom-hall-kitchen.” He added, the terms and conditions have been made in such a way that very little room is left for default in repayment.
Bankers say in case of joint loan given to brother-sister duo, the chance of default is high because when sister gets married and moves away their joint income gets affected.
However some banks give loan to two cousins living in a joint family but it will depend on a case-to-case basis. Govardhan said, “If the profile of the customers is really good and if there is a genuine reason for purchasing a joint property, such a case can be considered as an exception.”
Moreover some banks and home finance companies sanction joint loans to a couple even when they are engaged. But the loan amount is disbursed only after the marriage certificate is produced.
Banks or housing finance company do not give joint home loan is not given to two sisters, an uncle and a nephew or a niece as the risk of default is apparently quite high in such cases.
A banker said, “There is an uncertainty of repayment when such a set of people avail the loan together. Hence, most banks shy away from extending loans to such customers.”
LIC Housing Finance too has stringent terms and conditions for a joint loan offered to a brother-sister duo. For instance, one of the conditions in such case is that the property has to be owned jointly by the applicants. Moreover, the tenure of the loan might be reduced on a case-to-case basis, based on the remaining term of service of the applicants.
LIC Housing Finance official informed, “If the company is giving concession on some terms and conditions, it tightens other parameters.”
However, the joint home loan has many benefits such as it increases loan eligibility, both applicants can avail income tax benefits under Section 80C of the IT Act for the principal repaid and under Section 24 for the interest repaid.
However LIC Housing Finance has a product in which brother-sister duo can jointly avail home loan by combining their incomes, subject to certain terms and conditions.
But joint home loan can be availed by two brothers, however there are certain conditions.
A senior official working with LIC Housing Finance said some of the HFC do accept such applications, but volume of the loan sanctioned might be low as high risk is involved in this.
The official said, the HFC has stringent internal norms for sanctioning such loans. In such cases the loan eligibility reduces by 10 per cent.
The official further said, “The residual income (income left after excluding monthly expenses and other costs) goes down when siblings avail a home loan. Thus, the loan eligibility too goes down.”
In case of father-son duo the joint home loan is sanctioned depending on the remaining tenure of service of the father if he is a salaried professional. Likewise two brothers can also avail a joint loan, if both of them are co-owners of the property.
Santosh Govardhan, chief credit officer with IDBI Home Finance, said, “Two brothers availing a joint home loan have to be working and residing in the same city. Also, the property has to be a minimum two bedroom-hall-kitchen.” He added, the terms and conditions have been made in such a way that very little room is left for default in repayment.
Bankers say in case of joint loan given to brother-sister duo, the chance of default is high because when sister gets married and moves away their joint income gets affected.
However some banks give loan to two cousins living in a joint family but it will depend on a case-to-case basis. Govardhan said, “If the profile of the customers is really good and if there is a genuine reason for purchasing a joint property, such a case can be considered as an exception.”
Moreover some banks and home finance companies sanction joint loans to a couple even when they are engaged. But the loan amount is disbursed only after the marriage certificate is produced.
Banks or housing finance company do not give joint home loan is not given to two sisters, an uncle and a nephew or a niece as the risk of default is apparently quite high in such cases.
A banker said, “There is an uncertainty of repayment when such a set of people avail the loan together. Hence, most banks shy away from extending loans to such customers.”
LIC Housing Finance too has stringent terms and conditions for a joint loan offered to a brother-sister duo. For instance, one of the conditions in such case is that the property has to be owned jointly by the applicants. Moreover, the tenure of the loan might be reduced on a case-to-case basis, based on the remaining term of service of the applicants.
LIC Housing Finance official informed, “If the company is giving concession on some terms and conditions, it tightens other parameters.”
However, the joint home loan has many benefits such as it increases loan eligibility, both applicants can avail income tax benefits under Section 80C of the IT Act for the principal repaid and under Section 24 for the interest repaid.
Tuesday, July 13, 2010
Indiabulls housing finance announced its home loan teaser rate at 8.25%
After two leading lenders SBI and HDFC, Indiabulls housing finance, a part of Indiabulls financial services announced 8.25% teaser rate home loan.
Under this scheme company is offering a home loan at concessional rate at 8.25%, "taking care of any future fluctuations in interest rates up to April 2012 and market rate-linked rates thereafter," the company said in a statement.
The new scheme will be available across 140 cities and towns.
Indiabulls Financial Services CEO Gagan Banga told that company has set a target of achieving 40 to 45 per cent growth in its home loans business by this fiscal, apart from increasing the market share to 7-8 per cent by 2014.
He said, "The introduction of this new concessional home loan scheme at 8.25 per cent is a move to augur aggressive growth plans, with an annual target of Rs 6,000 crore worth new home loans disbursement."
Earlier on July 2, mortgage leader HDFC had launched its teaser home loan rate at 8.25 per cent and the scheme will be till the end of August. SBI, a public sector lender was the first one to extend its teaser home loan rates at 8% for another three months till September.
From July 1 all the banks have moved to base rate system but SBI decided to extend its popular home loan and car loan schemes without changing the terms.
Banga said, for the meantime the company is planning to increase its sales force for home loans by about 25-30 per cent to meet its growing customer needs. He added, at present the sales growth stand by 1,500.
Under this scheme company is offering a home loan at concessional rate at 8.25%, "taking care of any future fluctuations in interest rates up to April 2012 and market rate-linked rates thereafter," the company said in a statement.
The new scheme will be available across 140 cities and towns.
Indiabulls Financial Services CEO Gagan Banga told that company has set a target of achieving 40 to 45 per cent growth in its home loans business by this fiscal, apart from increasing the market share to 7-8 per cent by 2014.
He said, "The introduction of this new concessional home loan scheme at 8.25 per cent is a move to augur aggressive growth plans, with an annual target of Rs 6,000 crore worth new home loans disbursement."
Earlier on July 2, mortgage leader HDFC had launched its teaser home loan rate at 8.25 per cent and the scheme will be till the end of August. SBI, a public sector lender was the first one to extend its teaser home loan rates at 8% for another three months till September.
From July 1 all the banks have moved to base rate system but SBI decided to extend its popular home loan and car loan schemes without changing the terms.
Banga said, for the meantime the company is planning to increase its sales force for home loans by about 25-30 per cent to meet its growing customer needs. He added, at present the sales growth stand by 1,500.
Wednesday, June 30, 2010
Joint home loan is more advantageous than single loan
To increase the eligibility individuals can apply for a joint home loan. The most significant benefit of joint home loan is that the loan amount increases for purchasing the dream home. Moreover all the joint home applicants can avail tax rebates under Section 80C for principal repaid and under Section 24 for interest repaid. But these tax deductions are capped at 1lakh for the principal repaid and 1.5lakh for the interest repaid.
Following are some of the benefits of joint home loan:
1. To increase the home loan eligibility joint home loan is most beneficial. Wife and husband, son and father, brothers can pool for joint home loan and this increases the loan amount.
2. All the applicants in joint home loan can avail tax rebates under Section 80C for principal repaid and under Section 24 for interest repaid and HRA deduction. Under Section 80C, you can get a maximum tax deduction of Rs 1 lakh on principal repaid and under Section 24 you can get a tax break of up to Rs 1.5 lakh on interest repaid.
3. Around 4 and 6 people can take joint home loan, depending on their credit profiles.
4. In case of joint home loan bank insist on one most important point that all co-applicants should be the co-owners of the property.
In some cases two brothers want to take joint home loan or brother and sister want to take loan. However banks prefer to give joint loan to husband and wife, or parent and child. Some of the banks allow brothers to take joint home loan but both should be co-owners of the property. Banks do not give joint home loan to sisters, friends or unmarried couples living together.
Following are some of the benefits of joint home loan:
1. To increase the home loan eligibility joint home loan is most beneficial. Wife and husband, son and father, brothers can pool for joint home loan and this increases the loan amount.
2. All the applicants in joint home loan can avail tax rebates under Section 80C for principal repaid and under Section 24 for interest repaid and HRA deduction. Under Section 80C, you can get a maximum tax deduction of Rs 1 lakh on principal repaid and under Section 24 you can get a tax break of up to Rs 1.5 lakh on interest repaid.
3. Around 4 and 6 people can take joint home loan, depending on their credit profiles.
4. In case of joint home loan bank insist on one most important point that all co-applicants should be the co-owners of the property.
In some cases two brothers want to take joint home loan or brother and sister want to take loan. However banks prefer to give joint loan to husband and wife, or parent and child. Some of the banks allow brothers to take joint home loan but both should be co-owners of the property. Banks do not give joint home loan to sisters, friends or unmarried couples living together.
Tuesday, June 29, 2010
No more teaser rates on home loans as bank move to base rate
From Wednesday teaser rates offered by big banks will withdrawn back as banks move to a new system of pricing loans from July 1.
The big lenders – HDFC, ICICI Bank and State Bank of India had last year launched special loan schemes in which they offered low rates at fixed rates for the first couple of years — will end on June 30. The bank officials said, now none of these schemes can be extended.
India’s largest bank — SBI’s and ICICI Bank’s home loans will be priced on new base rate from July 1. SBI was the first lender to introduce teaser rate scheme offering home loans at 8% for the first year, 9% for the next two years and linked to market rates in the subsequent years.
Followed by, HDFC bank, which offered loan at fixed rate of 8.25 % up to March 2011, 9% for 2012-13 and the prevailing rate thereafter.
Then ICICI Bank offered a fixed rate of 8.25% during the first year, 9% in the second year with the loan then being shifted to a floating rate linked to the prevailing benchmark.
SBI during the special scheme witnessed aggressive sanctioning of loans on an average of Rs 2,000 crore of home loans every month. Therefore bank extended the scheme, as did HDFC, the leader in the mortgage lending segment.
But shift to new benchmark it is not clear that how banks will price their home loans, although banks have indicated that their base rates will be in the range of 8-10%. Banks are not clear that how they would lend.
Under the new base rate system no bank can lend below the base rate. Moreover old borrowers will have the option to shift to the base rate as the new benchmark. According to some bankers they might have to continue announcing the prime lending rate as a benchmark simultaneously as they have signed contract with borrowers to peg interest rates to the PLR.
The base rate will be favorable for borrowers in a falling interest rate regime as lenders will have to revise the base rate to reduce lending rates.
However RBI has made it clear to the banks that any changes in base rate will have to be applicable to existing customers also. The most important thing to notice is that RBI has only told banks to adopt the base rate system, and the new system will not be applicable to housing finance companies and NBFCs.
In the old system the benefits offered to new borrowers were not forward to the old customers on their home loans as banks offered low rates to new customers while old customers continued to pay higher rate.
According to banking analysts if the base rate is set in the range of 8-10%, home loans, will have to be priced higher than this. Furthermore, home loan rates are likely to increase as interest rates are expected to rise.
Meanwhile, many banks have held back a review of their interest rates until the adoption of the new benchmark. RBI executive director Deepak Mohanty pointed out that the base rate system will not increase the effective cost of borrowing as projected by the corporate lobby and that it is aimed at bringing transparency in the lending rates.
On the other hand bankers say that interest rates on home loans will continue to be competitive as it is a secured loan.
The big lenders – HDFC, ICICI Bank and State Bank of India had last year launched special loan schemes in which they offered low rates at fixed rates for the first couple of years — will end on June 30. The bank officials said, now none of these schemes can be extended.
India’s largest bank — SBI’s and ICICI Bank’s home loans will be priced on new base rate from July 1. SBI was the first lender to introduce teaser rate scheme offering home loans at 8% for the first year, 9% for the next two years and linked to market rates in the subsequent years.
Followed by, HDFC bank, which offered loan at fixed rate of 8.25 % up to March 2011, 9% for 2012-13 and the prevailing rate thereafter.
Then ICICI Bank offered a fixed rate of 8.25% during the first year, 9% in the second year with the loan then being shifted to a floating rate linked to the prevailing benchmark.
SBI during the special scheme witnessed aggressive sanctioning of loans on an average of Rs 2,000 crore of home loans every month. Therefore bank extended the scheme, as did HDFC, the leader in the mortgage lending segment.
But shift to new benchmark it is not clear that how banks will price their home loans, although banks have indicated that their base rates will be in the range of 8-10%. Banks are not clear that how they would lend.
Under the new base rate system no bank can lend below the base rate. Moreover old borrowers will have the option to shift to the base rate as the new benchmark. According to some bankers they might have to continue announcing the prime lending rate as a benchmark simultaneously as they have signed contract with borrowers to peg interest rates to the PLR.
The base rate will be favorable for borrowers in a falling interest rate regime as lenders will have to revise the base rate to reduce lending rates.
However RBI has made it clear to the banks that any changes in base rate will have to be applicable to existing customers also. The most important thing to notice is that RBI has only told banks to adopt the base rate system, and the new system will not be applicable to housing finance companies and NBFCs.
In the old system the benefits offered to new borrowers were not forward to the old customers on their home loans as banks offered low rates to new customers while old customers continued to pay higher rate.
According to banking analysts if the base rate is set in the range of 8-10%, home loans, will have to be priced higher than this. Furthermore, home loan rates are likely to increase as interest rates are expected to rise.
Meanwhile, many banks have held back a review of their interest rates until the adoption of the new benchmark. RBI executive director Deepak Mohanty pointed out that the base rate system will not increase the effective cost of borrowing as projected by the corporate lobby and that it is aimed at bringing transparency in the lending rates.
On the other hand bankers say that interest rates on home loans will continue to be competitive as it is a secured loan.
Tuesday, June 22, 2010
Shriram Group to launch home loan segment by December
Chennai-based financial player, Shriram Group is planning to enter into home loan segment by December. At present the group is offering general and life insurance products. The group plans to offer housing and mortgage loans under Shriram City Union Finance. It is a non-banking financial services company that accepts deposits and offers personal loan, business loan, auto loan and loan against gold.
In the beginning Shriram City Union Finance will offer housing loans in south and western regions. Shriram Group founder R Thyagarajan said, “If we have to remain profitable, we can’t be just a life insurance or general insurance company. We need to be a distributor of multiple financial products.”
The Shriram Group will also expand its wealth management advisory services to tier-II and tier-III cities. Currently it is carrying out operations under Shriram Wealth Advisors in Mumbai which caters to high net worth individuals. Thyagarajan said, “Going forward we will take our wealth management expertise to tier-II and tier-III cities in Tamil Nadu, Andhra Pradesh and Karnataka.”
Although the group is expanding its array of financial products but it has no plans to enter into the health insurance sector. The company has also clarified that it is not entering into mutual funds and has not applied for license for mutual fund operations in a joint venture with Sanlam Group of South Africa.
He said, “We will never get into the health insurance segment as the Indian market needs to get more sophisticated as far as health insurance goes. And though we aim to offer an array of financial products, we have no plans of getting into mutual funds.”
Earlier in 2006 Shriram Group had ventured into the life insurance business through Shriram Life Insurance and general insurance business through Shriram General Insurance Company in 2008 and both of the business has been launched in a 74:26 joint ventures with the Sanlam Group of South Africa.
This year company is planning to expand its general insurance business to the Philippines and Indonesia.
In the beginning Shriram City Union Finance will offer housing loans in south and western regions. Shriram Group founder R Thyagarajan said, “If we have to remain profitable, we can’t be just a life insurance or general insurance company. We need to be a distributor of multiple financial products.”
The Shriram Group will also expand its wealth management advisory services to tier-II and tier-III cities. Currently it is carrying out operations under Shriram Wealth Advisors in Mumbai which caters to high net worth individuals. Thyagarajan said, “Going forward we will take our wealth management expertise to tier-II and tier-III cities in Tamil Nadu, Andhra Pradesh and Karnataka.”
Although the group is expanding its array of financial products but it has no plans to enter into the health insurance sector. The company has also clarified that it is not entering into mutual funds and has not applied for license for mutual fund operations in a joint venture with Sanlam Group of South Africa.
He said, “We will never get into the health insurance segment as the Indian market needs to get more sophisticated as far as health insurance goes. And though we aim to offer an array of financial products, we have no plans of getting into mutual funds.”
Earlier in 2006 Shriram Group had ventured into the life insurance business through Shriram Life Insurance and general insurance business through Shriram General Insurance Company in 2008 and both of the business has been launched in a 74:26 joint ventures with the Sanlam Group of South Africa.
This year company is planning to expand its general insurance business to the Philippines and Indonesia.
Wednesday, June 9, 2010
Top 10 banks post 13.8% increase in home loan for FY 2009-10
In the FY 2009-10 the top 10 banks have registered a 13.8% increase in their home loan portfolio outdoing their smaller counterparts. Whereas, the growth of home loan market for the fiscal has been slow with industry posting a rise of 8%.
Amongst the top banks, country’s largest lender the State Bank of India is on the top of all home loan lenders with an increase of 32%.
In 2009-10, top 10 banks cornered 65% of the total outstanding housing loans as against 61.5% in the previous year.
However for FY 2009-10 SBI’s contribution in incremental home lending is valued at 78%. The bank's teaser loan rates have helped in increasing its home loan portfolio.
Following SBI is private lender, ICICI Bank in the 2nd place. Although the bank has reported a dip of 17% in its home loan book. Amongst the private banks HDFC Bank and Axis Bank reported increase by 74% and 41% respectively.
Amongst the public sector banks, Bank of India is the sole major public sector bank to post a single digit increase of 7%.
On the other hand NBFCs, HDFC and LIC Housing Finance posted a growth by 15% and 38% respectively.
Amongst the top banks, country’s largest lender the State Bank of India is on the top of all home loan lenders with an increase of 32%.
In 2009-10, top 10 banks cornered 65% of the total outstanding housing loans as against 61.5% in the previous year.
However for FY 2009-10 SBI’s contribution in incremental home lending is valued at 78%. The bank's teaser loan rates have helped in increasing its home loan portfolio.
Following SBI is private lender, ICICI Bank in the 2nd place. Although the bank has reported a dip of 17% in its home loan book. Amongst the private banks HDFC Bank and Axis Bank reported increase by 74% and 41% respectively.
Amongst the public sector banks, Bank of India is the sole major public sector bank to post a single digit increase of 7%.
On the other hand NBFCs, HDFC and LIC Housing Finance posted a growth by 15% and 38% respectively.
Friday, May 21, 2010
SBI increased loan limit by 10-fold for buying land to build a house
State Bank of India (SBI), country’s largest lender has decided to increase loan limit by ten-fold given to individuals who plan to buy land to build a house as bank moves forward into the housing segment.
As per the new proposal the bank will be lending Rs 10 crore for buying land for housing against the earlier cap of Rs 1 crore, informed a senior SBI official. The bank has also done modification in the norms pertaining to the construction period if the project is undertaken by government agencies. At present a project must be completed within two years.
A senior SBI official said, “A customer will also be eligible to avail another housing loan for other housing-related construction on that plot, enjoying the benefit of running both the loans concurrently.”
Moreover bank has set the margin money limit – the amount a customer has to pay upfront for availing a loan — at nearly 35% for loans above Rs 1 crore.
For loans up to Rs 75 lakh, bank has fixed the margin money at 20%. It is believed bank’s latest move to push ahead its housing sector shows its troubles with excess liquidity and a tepid credit offtake.
“We have a liquidity of over Rs 40,000 crore; schemes such as this will help us achieve our credit growth targets,” the official said.
The bank has set a target of increasing its credit growth by around 22%. Last year, the RBI had revised the credit growth target for commercial banks, the money they lend to customers, to 16% from 18%.
SBI has already started pushing forward its housing sector recently it extended its popular 8% home loan scheme, or teaser loans, until June 30.
It is also trying to work out other avenues to increase the credit offtake, though it will take steps to see that the due diligence process doesn’t suffer.
“To minimize fraud risk, two title search reports from different lawyers will be obtained before sanctioning the loan,” the official said.
It is believed this sharp increase in the loan amount will boost the real sector, which is at present, in spite of the return of buyers, is suffering from a big drop in the banking credit. According to RBI figures, for the 11 months to end February loans to the realty sector had decreased by 97% to Rs 842 crore as against Rs 33,617 from a year ago.
“Schemes such as this will indirectly ensure credit flow to these companies,” said a senior official of a real estate company.
As per the new proposal the bank will be lending Rs 10 crore for buying land for housing against the earlier cap of Rs 1 crore, informed a senior SBI official. The bank has also done modification in the norms pertaining to the construction period if the project is undertaken by government agencies. At present a project must be completed within two years.
A senior SBI official said, “A customer will also be eligible to avail another housing loan for other housing-related construction on that plot, enjoying the benefit of running both the loans concurrently.”
Moreover bank has set the margin money limit – the amount a customer has to pay upfront for availing a loan — at nearly 35% for loans above Rs 1 crore.
For loans up to Rs 75 lakh, bank has fixed the margin money at 20%. It is believed bank’s latest move to push ahead its housing sector shows its troubles with excess liquidity and a tepid credit offtake.
“We have a liquidity of over Rs 40,000 crore; schemes such as this will help us achieve our credit growth targets,” the official said.
The bank has set a target of increasing its credit growth by around 22%. Last year, the RBI had revised the credit growth target for commercial banks, the money they lend to customers, to 16% from 18%.
SBI has already started pushing forward its housing sector recently it extended its popular 8% home loan scheme, or teaser loans, until June 30.
It is also trying to work out other avenues to increase the credit offtake, though it will take steps to see that the due diligence process doesn’t suffer.
“To minimize fraud risk, two title search reports from different lawyers will be obtained before sanctioning the loan,” the official said.
It is believed this sharp increase in the loan amount will boost the real sector, which is at present, in spite of the return of buyers, is suffering from a big drop in the banking credit. According to RBI figures, for the 11 months to end February loans to the realty sector had decreased by 97% to Rs 842 crore as against Rs 33,617 from a year ago.
“Schemes such as this will indirectly ensure credit flow to these companies,” said a senior official of a real estate company.
Wednesday, May 5, 2010
LIC Housing Finance, a subsidiary of Life Insurance Corporation of India (LIC), will be applying for a banking license if it fulfills the conditions laid down by Reserve Bank of India (RBI) in its guidelines for fresh licenses for private sector companies. If its not possible to venture into banking with its parent company, LIC, the home loan company will continue with its plans of foraying into banking if it qualifies the proposed RBI guidelines.
R R Nair, director and chief executive officer of LIC Housing Finance, said in a press conference called to announce the company’s fourth quarter results, “We are interested in applying for a banking license. LIC may or may not be part of the venture because it is a public sector organization and has its own regulations to follow. We have not initiated any talks with RBI. We are waiting for the guidelines from the central bank.”
In the next six months company will also launch its real estate venture capital fund with an initial seed capital of Rs 500 crore. Nair said, “About 20 per cent of the capital will be from LIC and the housing finance company and the remaining would be mobilized from HNIs (high net worth individuals) and institutions.” Earlier company had planned to get into joint venture for this but it has changed its mind. Now it will be a subsidiary whereas LIC and the home finance company will be major shareholders. It will be investing in real estate projects in residential and commercial areas.
In Financial Chronicle it was first reported that LIC and LIC Housing Finance will start a real estate fund with a corpus of Rs 500 crore.
The company is also looking to raise Rs 20,000 crore during the financial year through non-convertible debentures and public deposits.
However in 2009-10 company share of home loans have increased by 12 per cent as against 6 per cent in 2008-09. The company offers special home loan rate of 8.9 per cent fixed for three years and a 8.75 per cent floating rate. By the end of fiscal year in March 2010, the company had approved Rs 18,043 crore of loans to individuals and real estate developers and disbursed Rs 14,853 crore. Out of this, company sanctioned about Rs 14,151 crore home loans and disbursed amount was Rs 12,448 crore. The company registered a 36 per cent year-on-year rise in net profit to Rs 213.51 crore in 2009-10.
R R Nair, director and chief executive officer of LIC Housing Finance, said in a press conference called to announce the company’s fourth quarter results, “We are interested in applying for a banking license. LIC may or may not be part of the venture because it is a public sector organization and has its own regulations to follow. We have not initiated any talks with RBI. We are waiting for the guidelines from the central bank.”
In the next six months company will also launch its real estate venture capital fund with an initial seed capital of Rs 500 crore. Nair said, “About 20 per cent of the capital will be from LIC and the housing finance company and the remaining would be mobilized from HNIs (high net worth individuals) and institutions.” Earlier company had planned to get into joint venture for this but it has changed its mind. Now it will be a subsidiary whereas LIC and the home finance company will be major shareholders. It will be investing in real estate projects in residential and commercial areas.
In Financial Chronicle it was first reported that LIC and LIC Housing Finance will start a real estate fund with a corpus of Rs 500 crore.
The company is also looking to raise Rs 20,000 crore during the financial year through non-convertible debentures and public deposits.
However in 2009-10 company share of home loans have increased by 12 per cent as against 6 per cent in 2008-09. The company offers special home loan rate of 8.9 per cent fixed for three years and a 8.75 per cent floating rate. By the end of fiscal year in March 2010, the company had approved Rs 18,043 crore of loans to individuals and real estate developers and disbursed Rs 14,853 crore. Out of this, company sanctioned about Rs 14,151 crore home loans and disbursed amount was Rs 12,448 crore. The company registered a 36 per cent year-on-year rise in net profit to Rs 213.51 crore in 2009-10.
Tuesday, March 30, 2010
To save taxes repay your home loan
To save tax you should repay your home loan. Under Section 24 of the Income Tax Act, interest paid up to Rs 1.5 lakhs a year on a home loan can be set off against 'loss' from other heads for a self-occupied property. Suppose the property has been acquired before April 1, 1999, interest up to Rs 30,000 a year can be set off. If the property has been rented out, the entire interest paid is deductible from the taxable income after computing rental income. The loan taken for renovation then interest up to Rs 30,000 a year is deductible.
Under Section 24 of the Income Tax Act, the pre-equated monthly installment (pre-EMI) interest amount (the interest amount paid during construction) is deducted equally over five years from the year of completion of construction.
You can not claim tax benefit on loan taken only for purchasing land, but if you take a composite loan (for land and house construction) you can claim income tax benefits only after the completion of the construction.
You can claim tax benefits on loans taken for construction of a residential property, buy a residential property, extend a house, and for major repairs or renovation of a house. As the construction progresses the home loan installment is given.
However during the construction period, you have to pay pre-EMI interest every month. The entire pre-EMI interest paid is allowed as a deduction (under Section 24) equally over five years starting from the year in which the construction is completed. In case of a self occupied house you can claim total deduction towards interest on the home loan is up to Rs 1.5 lakhs a year. While there is no limit for deduction on interest paid towards a second home loan provided you add the rental income (annual rental value of your second house) to your income. Thus the annual rental value will be the higher of actual rent received a year, municipal value, and fair rent fixed.
Moreover out of the total annual rental value, you will get standard deduction of 30 percent available towards maintenance charges and municipal taxes. Even the insurance premiums paid on the property can also be deducted.
However the deduction on principal loan amount repaid is set to Rs 1 lakh.
In case of personal loan, taken to purchase or construct a house, the tax benefit can be claimed on both principal and interest paid. But if you have borrowed the loan from a friend or relative, you will get tax benefit only on the interest paid.
If there are co-owners of the property then both can claim tax benefits separately, as per the shareholding in the property. If the ratio of shareholding is not mentioned in the purchase agreement, they can execute an agreement on a requisite stamp paper, mentioning the shares in the property, and claim the benefits separately. Both the co-owners can claim tax deductions up to Rs.1.5 lakhs a year separately towards interest paid for a self-occupied house and the entire interest paid on a rented-out house, after computing rental income received, and also up to Rs 1 lakh towards principal repaid.
Under Section 80C of the Income Tax Act, home loan borrowers can claim a deduction of up to Rs 1 lakh from the taxable income on a loan repaid during the year, along with specified savings instruments. Which means along with other specified savings instruments, a home loan repayment amount, the amount spent on stamp paper and registration costs on registering a house, all up to Rs 1 lakh is deductible from the total income.
In case you sell the property within five years from the year when you started claiming tax benefits, you will lose all the tax benefits you had availed under Section 80C (on the principal loan amount) and the amount will be clubbed to the income of the year in which the property has been sold. Whereas the deductions claimed on interest paid under Section 24 will remain intact.
Under Section 24 of the Income Tax Act, the pre-equated monthly installment (pre-EMI) interest amount (the interest amount paid during construction) is deducted equally over five years from the year of completion of construction.
You can not claim tax benefit on loan taken only for purchasing land, but if you take a composite loan (for land and house construction) you can claim income tax benefits only after the completion of the construction.
You can claim tax benefits on loans taken for construction of a residential property, buy a residential property, extend a house, and for major repairs or renovation of a house. As the construction progresses the home loan installment is given.
However during the construction period, you have to pay pre-EMI interest every month. The entire pre-EMI interest paid is allowed as a deduction (under Section 24) equally over five years starting from the year in which the construction is completed. In case of a self occupied house you can claim total deduction towards interest on the home loan is up to Rs 1.5 lakhs a year. While there is no limit for deduction on interest paid towards a second home loan provided you add the rental income (annual rental value of your second house) to your income. Thus the annual rental value will be the higher of actual rent received a year, municipal value, and fair rent fixed.
Moreover out of the total annual rental value, you will get standard deduction of 30 percent available towards maintenance charges and municipal taxes. Even the insurance premiums paid on the property can also be deducted.
However the deduction on principal loan amount repaid is set to Rs 1 lakh.
In case of personal loan, taken to purchase or construct a house, the tax benefit can be claimed on both principal and interest paid. But if you have borrowed the loan from a friend or relative, you will get tax benefit only on the interest paid.
If there are co-owners of the property then both can claim tax benefits separately, as per the shareholding in the property. If the ratio of shareholding is not mentioned in the purchase agreement, they can execute an agreement on a requisite stamp paper, mentioning the shares in the property, and claim the benefits separately. Both the co-owners can claim tax deductions up to Rs.1.5 lakhs a year separately towards interest paid for a self-occupied house and the entire interest paid on a rented-out house, after computing rental income received, and also up to Rs 1 lakh towards principal repaid.
Under Section 80C of the Income Tax Act, home loan borrowers can claim a deduction of up to Rs 1 lakh from the taxable income on a loan repaid during the year, along with specified savings instruments. Which means along with other specified savings instruments, a home loan repayment amount, the amount spent on stamp paper and registration costs on registering a house, all up to Rs 1 lakh is deductible from the total income.
In case you sell the property within five years from the year when you started claiming tax benefits, you will lose all the tax benefits you had availed under Section 80C (on the principal loan amount) and the amount will be clubbed to the income of the year in which the property has been sold. Whereas the deductions claimed on interest paid under Section 24 will remain intact.
Thursday, March 18, 2010
How to know the eligibility of home loan?
Most of the people don’t have the idea that how much loan they are eligible for? Here we have discussed few things related to home loan which can help you in knowing how much home loan you can take.
First one is eligibility criteria. To decide the amount of home loan two important factors are taken into consideration – income and repayment capacity. The other factors include qualification, age, dependants, assets, liabilities, credit report, savings and the stability and consistency of your occupation also matter. The bank can also calculate the loan amount taking a specific percentage of the cost of the property.
Second is repayment capacity. Banks calculate repayment capacity on the bases of your income and expenditure pattern. It is assumed that you need around 40% of your income as living expenses. For example if you are earning Rs60,000 per month and out of this you are spending Rs25,000 as living expenses and Rs20,000 on heads, such as a car loan, then your eligibility will be calculated on the remaining Rs 15,000.
Then, is the formula to calculate the eligibility.
Home loan eligibility=monthly savings/equated monthly installment (EMI) per lakh x 1 lakh. For a home loan of Rs1 lakh taken for 20 years at 10% interest rate, the EMI would be around Rs965. Thus, in this case the eligibility will be 15,000/965 x 1 lakh, or Rs15.54 lakh.
You can increase the home loan amount. You take joint home loan with your spouse, children, parents or siblings to increase your eligibility. Try to get the longer tenure of loan, this increases the eligibility.
First one is eligibility criteria. To decide the amount of home loan two important factors are taken into consideration – income and repayment capacity. The other factors include qualification, age, dependants, assets, liabilities, credit report, savings and the stability and consistency of your occupation also matter. The bank can also calculate the loan amount taking a specific percentage of the cost of the property.
Second is repayment capacity. Banks calculate repayment capacity on the bases of your income and expenditure pattern. It is assumed that you need around 40% of your income as living expenses. For example if you are earning Rs60,000 per month and out of this you are spending Rs25,000 as living expenses and Rs20,000 on heads, such as a car loan, then your eligibility will be calculated on the remaining Rs 15,000.
Then, is the formula to calculate the eligibility.
Home loan eligibility=monthly savings/equated monthly installment (EMI) per lakh x 1 lakh. For a home loan of Rs1 lakh taken for 20 years at 10% interest rate, the EMI would be around Rs965. Thus, in this case the eligibility will be 15,000/965 x 1 lakh, or Rs15.54 lakh.
You can increase the home loan amount. You take joint home loan with your spouse, children, parents or siblings to increase your eligibility. Try to get the longer tenure of loan, this increases the eligibility.
Wednesday, March 10, 2010
ICICI Bank, Kotak Mahindra hike home and auto loan rates by up to 0.5%
ICICI bank country’s largest private sector bank has withdrawn its 8.25% special home-loan scheme and hiked its auto-loan rates by up to 0.5%, signifying rising interest rate regime.
An ICICI Bank spokesperson told, "Auto loans rack rates have been raised by 0.25%-0.5% depending on (the) segment and tenor with effect from 5th March."
The bank sources have not given any reason for hiking rates but industry experts believe that the bank decision is largely prompted by indications given by the RBI in its last monetary policy review.
In its policy review RBI had hiked the cash reserve ration or the amount banks have to park with the central bank by 0.75% to 5.75%, absorbing Rs36,000 crore from the system in order to absorb excess liquidity from the system. The hike in CRR will be able to absorb Rs 36000 crore from the system.
ICICI Bank special home-loan scheme stands withdrawn from 1st March said the spokesperson. The bank has raised new auto loans which will be in the range of 9.75%-11%.
At present bank is offering home loans up to Rs30 lakh at 8.75%; loans between Rs30-lakh to Rs50 lakh at 9% and those above Rs50 lakh at 9.5%.
Another private sector bank, Kotak Mahindra Bank and its car financing group has also raised its home and car-loan rates.
Bank has hiked its home-loan rates by 0.25%-0.5% with effect from 18th February, Kotak Mahindra Prime (KMP), the car-financing arm of the group, has hiked its loan rates by 0.5%-0.75%.
Kamalesh Rao, Kotak Mahindra Bank's head of retail assets said, "We decided to hike the interest rates for home loans by 0.25%-0.5%. This is primarily to align lending rates in line with the cost of deposits."
He told this year bank registered a growth by 50% in its home-loan segment. KMP chief executive Sumit Bali told that the new lending rates will be effective from 8th March.
Mr Bali said, "We are hiking the lending rates as the cost of funds has gone up by up to 0.75%. We have to pass on this additional cost to customers, which we didn't do last month".
In this financial year KMP total loan book of around Rs 6,500 crore has registered a growth of around 35%. Mr Bali said, the company is looking at loan growth in the range of 15%-20%.
An ICICI Bank spokesperson told, "Auto loans rack rates have been raised by 0.25%-0.5% depending on (the) segment and tenor with effect from 5th March."
The bank sources have not given any reason for hiking rates but industry experts believe that the bank decision is largely prompted by indications given by the RBI in its last monetary policy review.
In its policy review RBI had hiked the cash reserve ration or the amount banks have to park with the central bank by 0.75% to 5.75%, absorbing Rs36,000 crore from the system in order to absorb excess liquidity from the system. The hike in CRR will be able to absorb Rs 36000 crore from the system.
ICICI Bank special home-loan scheme stands withdrawn from 1st March said the spokesperson. The bank has raised new auto loans which will be in the range of 9.75%-11%.
At present bank is offering home loans up to Rs30 lakh at 8.75%; loans between Rs30-lakh to Rs50 lakh at 9% and those above Rs50 lakh at 9.5%.
Another private sector bank, Kotak Mahindra Bank and its car financing group has also raised its home and car-loan rates.
Bank has hiked its home-loan rates by 0.25%-0.5% with effect from 18th February, Kotak Mahindra Prime (KMP), the car-financing arm of the group, has hiked its loan rates by 0.5%-0.75%.
Kamalesh Rao, Kotak Mahindra Bank's head of retail assets said, "We decided to hike the interest rates for home loans by 0.25%-0.5%. This is primarily to align lending rates in line with the cost of deposits."
He told this year bank registered a growth by 50% in its home-loan segment. KMP chief executive Sumit Bali told that the new lending rates will be effective from 8th March.
Mr Bali said, "We are hiking the lending rates as the cost of funds has gone up by up to 0.75%. We have to pass on this additional cost to customers, which we didn't do last month".
In this financial year KMP total loan book of around Rs 6,500 crore has registered a growth of around 35%. Mr Bali said, the company is looking at loan growth in the range of 15%-20%.
Friday, February 26, 2010
Banks seek clarification from RBI on pricing of old home loan rates
The Reserve Bank of India (RBI) has instructed banks to give loans on ‘base rate’ instead of the PLR. The new system will start from April 2010. The base rate will be calculated on a cost-based formula and will be lower than the PLR, although banks will be free to charge a risk spread over the base rate but they cannot lend below the base rate.
However banks have asked for the clarity from RBI on pricing of old home loans once the new ‘base rate’ is adapted as loans given for a longer duration i.e. for 15-20 years, do not have any provision for replacing the prime lending rate (or PLR) – the anchor interest rate to which the floating rates are linked.
Moreover RBI has instructed banks that during the renewal of loans or resetting interest charges, banks should take the ‘base rate’ as the anchor rate. The home loan agreements are like other loan deeds, are legal documents, according to bankers many retail borrowers might resist a switchover from PLR to ‘base rate’ and signing on a new agreement.
Then bankers will also have to struggle with the fact there is no renewal date in case of home loans and existing loan agreements are for the entire tenure of the loan. Also, as the base rate is a floor rate, thus bankers might have to hike the interest rates on some home loans if the base rate of the bank is higher than the existing loan rates.
At least three senior bankers told ET as there is uncertainty on the matter thus they are seeking clarity from RBI on this. “The moot point is the floating rate home loan do not have renewal clause, making it difficult for banks to link these loans to base rate. Alternatively, banks can give customers an option to shift to base rate. But, if customers have availed of loan at rate lower than the base rate, they may resist shifting to base rate. Banks also cannot force base rate on them as it’s a legal document (loan agreement).”
According to bankers the other alternative can be to maintain two parallel rates – PLR and base rate till the maturity of all old loans in their book. But bankers say, RBI might not approve this move.
The RBI main aim is to eliminate the discriminatory prices for old and new customers. At present the old home loan customers are paying higher interest rate in comparison to new home loan borrowers, even though both of them have taken floating rate loans. According to banks they offered new loans at cheaper rate because their incremental cost of funds has come down. But RBI argues that reduction in incremental cost results in reduction of overall cost of funds and thus the benefit of lower rate must be passed to the old home loan borrowers as well. Therefore, if BPLR continues to be anchor rate for old home loans, it might counteract the purpose of introducing base rate.
A senior banker said, “In case of short-term loans given to corporates, individuals and small businessmen, banks may have to keep alive its BPLR. But whether it can be kept active for home loan which has a 15-year maturity is yet not clear.”
The main reason for RBI to introduce the base rate system is to improve the transmission of policy rate to the credit market. Frequently RBI has observed that whenever the policy rates have been reduced banks have not reduced the lending rates by the same quantum. In the policy document of January 2009, RBI governor, D Subbarao pointed out, “While changes in RBI’s policy rates were quickly transmitted to the money and government securities markets, transmission to the credit market was slower. Evidently, the transmission is still in progress.”
Between October 2008 and December 2009, RBI considerably reduced policy rates — the repo rate by 425 basis points and the reverse-repo rate by 275 bps. CRR was also reduced by 400 basis points of NDTL. But the public sector banks reduced BPLR by 125-275 basis points, followed by 100-125 basis points by private banks and 125 basis points by five major foreign banks.
However banks have asked for the clarity from RBI on pricing of old home loans once the new ‘base rate’ is adapted as loans given for a longer duration i.e. for 15-20 years, do not have any provision for replacing the prime lending rate (or PLR) – the anchor interest rate to which the floating rates are linked.
Moreover RBI has instructed banks that during the renewal of loans or resetting interest charges, banks should take the ‘base rate’ as the anchor rate. The home loan agreements are like other loan deeds, are legal documents, according to bankers many retail borrowers might resist a switchover from PLR to ‘base rate’ and signing on a new agreement.
Then bankers will also have to struggle with the fact there is no renewal date in case of home loans and existing loan agreements are for the entire tenure of the loan. Also, as the base rate is a floor rate, thus bankers might have to hike the interest rates on some home loans if the base rate of the bank is higher than the existing loan rates.
At least three senior bankers told ET as there is uncertainty on the matter thus they are seeking clarity from RBI on this. “The moot point is the floating rate home loan do not have renewal clause, making it difficult for banks to link these loans to base rate. Alternatively, banks can give customers an option to shift to base rate. But, if customers have availed of loan at rate lower than the base rate, they may resist shifting to base rate. Banks also cannot force base rate on them as it’s a legal document (loan agreement).”
According to bankers the other alternative can be to maintain two parallel rates – PLR and base rate till the maturity of all old loans in their book. But bankers say, RBI might not approve this move.
The RBI main aim is to eliminate the discriminatory prices for old and new customers. At present the old home loan customers are paying higher interest rate in comparison to new home loan borrowers, even though both of them have taken floating rate loans. According to banks they offered new loans at cheaper rate because their incremental cost of funds has come down. But RBI argues that reduction in incremental cost results in reduction of overall cost of funds and thus the benefit of lower rate must be passed to the old home loan borrowers as well. Therefore, if BPLR continues to be anchor rate for old home loans, it might counteract the purpose of introducing base rate.
A senior banker said, “In case of short-term loans given to corporates, individuals and small businessmen, banks may have to keep alive its BPLR. But whether it can be kept active for home loan which has a 15-year maturity is yet not clear.”
The main reason for RBI to introduce the base rate system is to improve the transmission of policy rate to the credit market. Frequently RBI has observed that whenever the policy rates have been reduced banks have not reduced the lending rates by the same quantum. In the policy document of January 2009, RBI governor, D Subbarao pointed out, “While changes in RBI’s policy rates were quickly transmitted to the money and government securities markets, transmission to the credit market was slower. Evidently, the transmission is still in progress.”
Between October 2008 and December 2009, RBI considerably reduced policy rates — the repo rate by 425 basis points and the reverse-repo rate by 275 bps. CRR was also reduced by 400 basis points of NDTL. But the public sector banks reduced BPLR by 125-275 basis points, followed by 100-125 basis points by private banks and 125 basis points by five major foreign banks.
Tuesday, February 9, 2010
Axis Bank leads in withdrawing teaser home loan scheme
After the Reserve Bank of India has hiked cash reserve ratio (CRR) there are chances banks might start withdrawing teaser home loan offers. Axis Bank India’s third- largest private bank has announced to withdraw its teaser home loan scheme two months before the schedule tenure.
Earlier on January 6 bank had launched a fixed-cum-floating rate home loan scheme. Under this scheme bank has been offering 8.25 per cent interest rate for the first two years. Bank charges 3.5 per cent and 3 per cent interest on loan which is less than the mortgage reference rate for loans up to and above Rs 30 lakh, respectively.
A senior bank executive informed that as the CRR has been hiked due to which it would not be possible for bank to offer a fixed rate for two years. But it will continue to offer 8 per cent fixed rate for the first year.
The bank has also removed the product information from its website. This move of bank has surprised many. A direct selling agent had applied for home loan under the scheme said, “With Axis Bank suddenly withdrawing its teaser rate scheme, I am approaching other banks.”
Last year a number of banks launched special teaser home loan schemes led by countries largest, State Bank of India and Axis was one of the last banks to offer such a scheme.
A senior SBI executive has informed that with the hike in CRR the cost pressure is increasing, but bank will fulfill its commitment and continue to offer the product till the end of March.
However under Housing Development Finance Corporation’s the sanction of loans under teaser rate scheme will close on February 13. The disbursement of loans will be completed by March 31. The Axis bank scheme was advantageous as there was no prepayment penalty. According to industry source, “After two years, if the bank’s rates go up sharply, customers can shift to other banks without any penalty.”
On the other hand, other banks are charging around 2 per cent of the outstanding amount as pre-payment penalty. The hike in CRR by 75 basis points done by RBI is expected to absorb around Rs 36,000 crore from the system. Therefore, this along with advance tax outflows in mid-March is likely to reduce liquidity. In view of this in March most of the banks are likely to review their teaser loan schemes.
Earlier on January 6 bank had launched a fixed-cum-floating rate home loan scheme. Under this scheme bank has been offering 8.25 per cent interest rate for the first two years. Bank charges 3.5 per cent and 3 per cent interest on loan which is less than the mortgage reference rate for loans up to and above Rs 30 lakh, respectively.
A senior bank executive informed that as the CRR has been hiked due to which it would not be possible for bank to offer a fixed rate for two years. But it will continue to offer 8 per cent fixed rate for the first year.
The bank has also removed the product information from its website. This move of bank has surprised many. A direct selling agent had applied for home loan under the scheme said, “With Axis Bank suddenly withdrawing its teaser rate scheme, I am approaching other banks.”
Last year a number of banks launched special teaser home loan schemes led by countries largest, State Bank of India and Axis was one of the last banks to offer such a scheme.
A senior SBI executive has informed that with the hike in CRR the cost pressure is increasing, but bank will fulfill its commitment and continue to offer the product till the end of March.
However under Housing Development Finance Corporation’s the sanction of loans under teaser rate scheme will close on February 13. The disbursement of loans will be completed by March 31. The Axis bank scheme was advantageous as there was no prepayment penalty. According to industry source, “After two years, if the bank’s rates go up sharply, customers can shift to other banks without any penalty.”
On the other hand, other banks are charging around 2 per cent of the outstanding amount as pre-payment penalty. The hike in CRR by 75 basis points done by RBI is expected to absorb around Rs 36,000 crore from the system. Therefore, this along with advance tax outflows in mid-March is likely to reduce liquidity. In view of this in March most of the banks are likely to review their teaser loan schemes.
Thursday, February 4, 2010
Canara Bank to double home loan portfolio by Dec, 2010
Canara Bank, Bangalore-based public sector lender has set a target to double its home loan portfolio to around Rs 17,500 crore by December 2010. as of December 2009, bank’s home loan portfolio stood at Rs 8,464 crore, little over 5 per cent of the total advances informed the bank’s executive director K L Jagadish Pai.
During the announcement of bank’s third quarter financial results he told Business Standard, “We had actually set a target to achieve at least 10 per cent of our loan portfolio from home loans by March-end 2010. But, it is not possible in the remaining two months and we intend to disburse another Rs 6,000 crore during the first three quarters of the next financial year-ending December 2010.” Meanwhile for the year-ending March 2010, the bank aims to achieve Rs 1,75,000 crore advances.
He told, however the bank has performed better in home loan sector and was able to achieve 27 per cent growth in the first three quarters of the present fiscal-ended December 2009 against the corresponding period last year. In August 2009 the bank had launched a home loan scheme in which it offered 8 per cent interest rate for the first year and 9 per cent for the second year and 10 per cent for the remaining period of the loan for individual home loan customers. The scheme has been extended up to March 2010.
Pai said, “The real estate sector is reviving and people are coming back for loans. We are the bank with lowest exposure to real estate among our peers. Our exposure to commercial real estate is less than Rs 2,600 crore presently compared to Rs 2,900 crore at the beginning of the fiscal. We are looking at financing more and more Bangalore-based real estate companies so that we will get more individual accounts during this year.”
In view of long gestational period bank is aiming to increase housing loans. He said the sanctions are likely to touch 10 per cent of the asset book of the bank, but the disbursal can be less. He added for the next two months of the present fiscal, the bank is likely to disburse another Rs 500 crore.
He told bank has opened more retail hubs whose number has increased to 37 across Tier-I, Tier-II and Tier-III cities in the country. He said, “We are targeting 10 accounts per day for each retail hub.” Thus the bank aims to target more of individual home loan seekers than the commercial real estate sector. The loan amount of these loans will be around Rs 15-20 lakh.
He added, the bank has not been aggressing in lending to commercial real estate segment in spite of big demand for funds, and said that at present the total exposure will stand around Rs 2,000 crore. He told, “We are not bullish on commercial real estate like many other banks.”
He said the present sanction of loans by the bank stand at close to Rs 30,000 crore, and added part of it will be disbursed over next 18 months.
During the announcement of bank’s third quarter financial results he told Business Standard, “We had actually set a target to achieve at least 10 per cent of our loan portfolio from home loans by March-end 2010. But, it is not possible in the remaining two months and we intend to disburse another Rs 6,000 crore during the first three quarters of the next financial year-ending December 2010.” Meanwhile for the year-ending March 2010, the bank aims to achieve Rs 1,75,000 crore advances.
He told, however the bank has performed better in home loan sector and was able to achieve 27 per cent growth in the first three quarters of the present fiscal-ended December 2009 against the corresponding period last year. In August 2009 the bank had launched a home loan scheme in which it offered 8 per cent interest rate for the first year and 9 per cent for the second year and 10 per cent for the remaining period of the loan for individual home loan customers. The scheme has been extended up to March 2010.
Pai said, “The real estate sector is reviving and people are coming back for loans. We are the bank with lowest exposure to real estate among our peers. Our exposure to commercial real estate is less than Rs 2,600 crore presently compared to Rs 2,900 crore at the beginning of the fiscal. We are looking at financing more and more Bangalore-based real estate companies so that we will get more individual accounts during this year.”
In view of long gestational period bank is aiming to increase housing loans. He said the sanctions are likely to touch 10 per cent of the asset book of the bank, but the disbursal can be less. He added for the next two months of the present fiscal, the bank is likely to disburse another Rs 500 crore.
He told bank has opened more retail hubs whose number has increased to 37 across Tier-I, Tier-II and Tier-III cities in the country. He said, “We are targeting 10 accounts per day for each retail hub.” Thus the bank aims to target more of individual home loan seekers than the commercial real estate sector. The loan amount of these loans will be around Rs 15-20 lakh.
He added, the bank has not been aggressing in lending to commercial real estate segment in spite of big demand for funds, and said that at present the total exposure will stand around Rs 2,000 crore. He told, “We are not bullish on commercial real estate like many other banks.”
He said the present sanction of loans by the bank stand at close to Rs 30,000 crore, and added part of it will be disbursed over next 18 months.
Monday, January 18, 2010
RBI deputy governor express concern over teaser home loan rates
Almost all the banks are offering ‘teaser' home loan rates or the fixed-cum-floating rates which are a major cause for concern.
Ms Usha Thorat, Deputy Governor, Reserve Bank of India said, banks must inform the borrowers about the implications of such rates and during evaluation the repaying capacity of the borrowers is taken into account when the rates become ‘normal’.
Ms Thorat stated it is the responsibility of the each bank to take up the issue at its own level.
Ms Thorat's views are of utmost importance in view of the fact as most of the banks, both public and private, had announced dual rate home loan schemes.
In these schemes the banks have fixed interest rate at a low rate of 8-8.5 per cent for the first few years after which it becomes the prevailing floating rate.
State Bank of India was the first one to launch such a scheme, later on almost all the other banks followed it. Mr O. P. Bhatt, Chairman, State Bank of India stated the bank had launched the special loan scheme due to excess liquidity and no pressure was put on it by the government.
He added at the time of normal floating rate loans also, the interest rate increases after a few years.
He said the 8 per cent loan scheme helped in the growth of SBI's present credit offtake. Mr M.V. Nair, Chairman of the Indian Banks' Association and Chairman and Managing Director, Union Bank of India said, during the sanction of loan bank does an appraisal of the borrowers' repaying capacity and transparency is maintained in the rates, thus there is no issue with regard to dual rate home loan schemes.
Ms Usha Thorat, Deputy Governor, Reserve Bank of India said, banks must inform the borrowers about the implications of such rates and during evaluation the repaying capacity of the borrowers is taken into account when the rates become ‘normal’.
Ms Thorat stated it is the responsibility of the each bank to take up the issue at its own level.
Ms Thorat's views are of utmost importance in view of the fact as most of the banks, both public and private, had announced dual rate home loan schemes.
In these schemes the banks have fixed interest rate at a low rate of 8-8.5 per cent for the first few years after which it becomes the prevailing floating rate.
State Bank of India was the first one to launch such a scheme, later on almost all the other banks followed it. Mr O. P. Bhatt, Chairman, State Bank of India stated the bank had launched the special loan scheme due to excess liquidity and no pressure was put on it by the government.
He added at the time of normal floating rate loans also, the interest rate increases after a few years.
He said the 8 per cent loan scheme helped in the growth of SBI's present credit offtake. Mr M.V. Nair, Chairman of the Indian Banks' Association and Chairman and Managing Director, Union Bank of India said, during the sanction of loan bank does an appraisal of the borrowers' repaying capacity and transparency is maintained in the rates, thus there is no issue with regard to dual rate home loan schemes.
Wednesday, January 6, 2010
SBOP extended home loan till Jan, 31, 2010
The State Bank of Patiala, following the other big players has announced that its home loan scheme has been extended up till January 31, 2010. The bank is offering 8% interest on its home loan scheme. Earlier the home loan scheme was available up to 31 December, 2009.
The bank is offering three schemes- SBP Hi-Five under this it has set interest rate at 8 per cent for a maximum of five years on up to Rs 5 lakhs, and the other schemes are SBP Easy Home Loan and SBP Advantage Home Loan in these schemes the bank is offering interest rate is at fixed rate of 8 per cent for the first year.
Bank will not charge any pre-payment penalty if the customer opts to pre-pay the loan on reset date.
The bank is offering three schemes- SBP Hi-Five under this it has set interest rate at 8 per cent for a maximum of five years on up to Rs 5 lakhs, and the other schemes are SBP Easy Home Loan and SBP Advantage Home Loan in these schemes the bank is offering interest rate is at fixed rate of 8 per cent for the first year.
Bank will not charge any pre-payment penalty if the customer opts to pre-pay the loan on reset date.
Subscribe to:
Posts (Atom)